Reference no: EM133017106

Questions -

Q1. Hot Co. owns 50,000 shares out of the 300,000 total outstanding shares of Cold, Inc. The investment in Cold's shares has a carrying amount of P1,200,000 on Jan. 1, 20x1. Hot also owns bonds 1ssued by Cold that are convertible into 30,000 ordinary shares. The bonds are currently convertible; however, Hot Co. does not intend to convert them. Cold does not have any other outstanding convertible bonds aside from those held by Hot. Cold reported profit of P3,300,000 and declared and paid cash dividends of fP180,000 in 20x1. How much is the carrying amount of Hot Co.'s investment in Cold shares as of Dec. 31, 20x1?

a. 1,720,000

b. 1,872,363

c. 1,956,364

d. 1,980,000

Q2. Joe Co. owns 25% of the outstanding ordinary shares of Monkey Co. Monkey has outstanding noncumulative preference shares with aggregate par value of P5,000,000 and fixed dividend rate of 5%, none of which is held by Joe. Monkey reported P2,800,000 profit for the year and declared dividends of P800,000 to preference shareholders and P900,000 to ordinary shareholders. How much investment income should Joe Co. recognize tor the year?

a. 225,000

b. 500,000

c. 637,500

d. 1,050,00

Q3. Art Co. owns 25,000 out of the 100,000 outstanding voting shares of Ritz Co. Art accounts for the investment, which has carrying amount of P1,300,000 on January 1, 20x1, under the investment at P140 per share-the fair value on this date. Art incurs transaction costs of P120,000 on the sale. Ritz reports profit of P4,200,000 for the year and declares cash dividends of P1,200,000 on December 31, 20x1. The profit is earned even during the year. Ritz's shares are selling P130 per share on December 31,20x1. How much is the net effect of the investment in Art Co.'s profit or loss in 20x1?

a. 2,092,500

b. 2,289,500

c. 2,236,500

d. 2,420,500