Reference no: EM132979908
Question - On July 1, 2022, Larmaine Company acquired a 25% interest in the outstanding shares of Dove Company at a total cost of P1,750,000. The underlying equity of the shares acquired by Larmaine was P1,500,000. The difference was due to the following:
I. Land with current fair value of P750,000 more than its carrying amount.
II. Depreciable plant assets with current fair value of P150,000 more than the carrying amount.
III. Inventories which are undervalued by P20,000.
All other identifiable assets of Dove Company have fair values equivalent to their book values. The depreciable plant assets have remaining useful lives of 10 years from the date of acquisition of the investment. All of the inventories have been sold as of December 31, 2022.
Larmaine received P100,000 dividends from Dove in 2022. Dove reported P1,350,000 profit during the year ended December 31, 2022. Interim reports from Dove revealed that it earned P650,000 during the first two quarters of 2022. There are no differences in accounting policies between the two companies, nor do differences in reporting dates exist. Assume that there is no indication of impairment in the shares as of December 31, 2022. How much was the income from associate reported in Larmaine's profit and loss for the year ended December 31, 2022?
a.175,000
b.161,875
c.168,125
d.166,250
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