Reference no: EM132756894

On January 4, 2018, Karen Company paid Php 30,000,000 for 1,000,000 shares of Klaire Company ordinary shares. The investment represents 20% interest in the net assets of Klaire Company and gave Karen Company the ability to exercise significant influence over Klaire operations. Karen Company receives dividends of Php 1/share on December 15, 2018 and Klaire reported a net income of Php 8,000,000 for the year ended December 31, 2018. The market value of Klaire Company ordinary shares at December 31, 2018 was Php 32/share. On the purchase date, the book value off Klaire net asset was Php 120,000,000 and the fair market value of Klaire 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.

Required: Based on the above, answer the following:

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

Problem 2: What amount of investment revenue should Karen 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 Karen 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 Karen Company investment in ordinary share of Klaire Company on December 31, 2018

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