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What amount of investment income should be reported

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Reference no: EM133188119

Question - On January 2, 2021, Johnson Inc. acquired 10% interest in Powder Co. by paying P1,000,000 for 5,000 ordinary shares. On this date, the net assets of Powder Co. totaled P9 million. The investment was classified as a financial asset at fair value through other comprehensive income. The fair values of Powder Co.'s identifiable assets and liabilities approximate their book values. On August 1, 2021, Johnson received dividends of P4 per share from Powder Co. Fair value of the stocks on December 31, 2021 was P210. Net income reported by Powder for the year ended amounted to P2,500,000.

On August 31, 2022, Johnson Inc. paid P1.5 million to purchase 5,000 additional shares of Powder Co. from another shareholder. On this date the fair value of the net assets exceeds carrying value by P750,000 attributable to depreciable asset with estimated remaining life of 5 years. Johnson received a total dividend of P300,000 during the year, of which P10 per share were declared on July 1, 2022 and were received on August 2022, the rest were declared on September 1, 2022 and distributed on October 2022. Net income reported for the year ended amounted to P3,500,000 with P1,800,000 being earned for the second half six months ended December 31, 2022.

What amount of investment income should be reported on Johnson's income statement for the year ended December 31, 2022?

P290,000

P250,000

P230,000

P280,000

What is the carrying value of the investment in its December 31, 2022 statement of financial position?

P2,980,000

P3,100,000

P3,000,000

P2,875,000

Reference no: EM133188119

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