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Problem - On January 1, 2013, Roy Corp. purchased 30% of the voting common stock of Jerry Co., paying P2,000,000. Roy properly accounts for this investment using the equity method. At the time of the investment, Jerry's total stockholders' equity was P3,000,000. Roy gathered the following information about Jerry's assets and liabilities whose book values and fair values differed:
Book Value
Fair Value
Buildings (15-year life)
P1,000,000
P1,500,000
Equipment (5-year life)
2,500,000
3,000,000
Franchises (10-year life)
0
500,000
Any excess of cost over fair value was attributed to goodwill, which has not been impaired. Jerry Co. reported net income of P300,000 for 2013, and paid dividends of P100,000 during that year.
Required - What is the amount of excess amortization expense for Roy Corp's investment in Jerry Co. for the first year?
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