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Prepare journal entries on the books of Loyal Company

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Reference no: EM132858797

Problem - Loyal Company acquired 30% of Faith Company's voting share capital for P2,800,000 on January 1, 2019. Inventor's 30% interest in Faith gave Loyal the ability to exercise significant influence over Faith's operating and financial policies. During 2019, Faith earned P1,100,000 and paid dividend of P700,000. Faith reported earnings of P1,400,000 for the six months ended June 30, 2020 and P2,800,000 for the year ended December 31, 2020. On July 1, 2020, Loyal sold half of the investment in Faith for P2,200,000 cash. Faith paid dividend of P500,000 on October 1, 2020. The fair value of the retained investment is P2,300,000 on July 1, 2020 and P2,500,000 on December 31, 2020. The retained investment is to be held as financial asset at fair value through profit or loss. Prepare journal entries on the books of Loyal Company for 2019 and 2020.

Reference no: EM132858797

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