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What amount of gain or loss should the company recognize

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Question - On January 2, 2018, Harry Company purchased 200,000 shares (20%) of Terry Company's ordinary share for P4,500,000. During 2018, Terry reported the following in its statement of comprehensive income a P4,000,000 net income and a P500,000 unrealized gain from its investment in available for sale. Terry Company paid cash dividends of P3,000,000 on December 31, 2018. On January 1, 2019, Harry Company sold 50,000 shares of Terry Company at the current market value of Terry's share at P32 per share.

1. What amount of gain should Harry Company recognize from the sale of 50,000 shares?

a. 400,000

b. 425,000

c. 450,000

d.500,000

2. If the retained investment is reclassified as financial instrument immediately after the sale, what amount of gain or loss should the company recognize and report to profit or loss as a result of the transfer?

a. None

b. 1,200,000

c. 1,275,000

d. 1,300,000

Reference no: EM132634995

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