Reference no: EM132939010
Problem 1 - Thank Company purchased 40% of God Company's outstanding ordinary shares on January 2, 2020 for P8,000,000. The carrying amount of God's net assets at the date of purchase totaled P18,504,000. Fair values and carrying values were the same for all items except for plant and inventory for which fair values exceeded their carrying amounts by P1,000,000 and P200,000, respectively. The plant has a 20-year life. The entire inventory was sold during 2020. Goodwill, if any, is not to be amortized and no impairment test has been done since the company believes that the goodwill has yet to decline its value. During 2020, God Company reported net of tax income of P2,400,000 and paid a P400,000 cash dividends. Income tax rate is 32%. What amount should Thank Company report in its profit or loss from its investment in God Company for the year ended December 31, 2020?
a) P836,000 c) P860,000
b) P844,000 d) P892,000
Problem 2 - Man Company purchased 10% of Kind Corporation's 200,000 outstanding shares of ordinary shares on January 2, 2020 for P2,500,000. On October 31, 2020, Man Company purchased another 40,000 shares of Kind for P6,000,000. There was no goodwill as a result of either acquisition and Kind had not issued any stock dividends during 2020. Kind reported earnings of P6,000,000 for the year ended December 31, 2020. What amount should Man Company report in its December 31, 2020 balance sheet as Investment in Kind?
a) P8,500,000 c) P9,400,000
b) P9,300,000 d) P10,300,000
Problem 3 - Park Corporation acquired 30% of Light Company's voting stock on January 2, 2019 for P2,000,000. During 2019, Light earned P800,000 and paid dividends of P500,000. Park's interest in Light of 30%, gives Park the ability to exercise significant influence over Light's operating and financial policies. For the year 2020, Light earned P1,000,000 but paid dividends of P300,000 on April 1, and another P300,000 on October 1, 2020. On July 1, 2020, Park sold half of its stock investment in Light for P1,320,000 cash. What should be the gain on sale of this investment in Park's 2020 profit or loss?
a) P200,000 c) P275,000
b) P245,000 d) P320,000