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What amount of gain on sale of investment should recognized

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On January 1, 2018, Tony Company purchased 50,000 shares of XYZ Co. for P7,200,000. On October 1, 2018, the company received 50,000 stock rights from the investee, each right entitled the shareholder to acquire one share for P85. The market price of the investee's share was P100 immediately before the rights were issued and P90 immediately after the rights were issued. On December 1, 2018, the company exercised all the stock rights. On December 31, 2018, the entity sold 25,000 shares at P90 per share. The stock rights are not accounted for separately.

Problem 1. If the FIFO approach is used, what amount of gain on sale of investment should be recognized in 2018?

Problem 2. If the average approach is used, what amount of gain on sale of investment should be recognized in 2018?

Reference no: EM132767025

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