Reference no: EM132970093

Problem - Inn Corporation had 30,000 ordinary shares of NPA Company which were acquired during the Year 2 for a total consideration of P1,800,000, including P30,000 directly attributable costs. The shares were held for some anticipated long-term benefits and are not intended for immediate sale. Inn Corporation exercised its option to recognize the change in the equity investments' fir value through other comprehensive income.

On December 31, Year 2, the NPA shares were selling at P65 per share.

In July Year 3, Inn Corporation received a 20% bonus issue. Subsequently during the year, it sold 15,000 shares at 70 per share. The fair value of NPA ordinary at December 31. Year 3 was P72 per share.

Required -

a) Give all entries relating to the foregoing for Year 3. The company has the policy of transferring to retained earnings the cumulative balance in equity (resulting from the change in fair value) when the investment is derecognized.

b) How much shall be reported as total income in profit or loss for Year 3 as a result of this investment?

c) At what amount should the investment be shown on December 31, Year 3 statement of financial position?

d) What is the amount that will be shown in the equity section of the statement of financial position at December 31, Year 3 relating to the investment account?