Reference no: EM132757469

On January 4, 2018, ABC Company paid Php 30,000,000 for 1,000,000 shares of XYZ Company ordinary shares. The investment represents 20% interest in the net assets of XYZ Company and gave ABC Company the ability to exercise significant influence over XYZ operations. ABC Company receives dividends of Php 1/share on December 15, 2018 and XYZ reported a net income of Php 8,000,000 for the year ended December 31, 2018. The market value of XYZ Company ordinary shares at December 31, 2018 was Php 32/share. On the purchase date, the book value off XYZ net asset was Php 120,000,000 and the fair market value of XYZ Company depreciable asset, with an average remaining useful life of 6 years, exceeded their book value by Php 6,000,000. The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable goodwill.

Problem 1. How much is the implied goodwill from the acquisition?

Problem 2. What amount of investment revenue should ABC Company report on its net income statement for the year ended December 31, 2018 under the fair value method?

Problem 3. What amount of investment revenue should ABC Company report on its income statement for the year ended December 31, 2018 under the equity method?

Problem 4. Under the equity method, the carrying value of ABC Company investment in ordinary share of XYZ Company on December 31, 2018

Problem 5. What amount should ABC Company report on its December 31, 2018 statement of financial position as its investment in XYZ Company under fair value method?