Reference no: EM132938197
Questions -
1) On January 1, 2019, Mega Company acquired 10% of the outstanding ordinary shares of Penny Company for P4,000,000. The investment was appropriately accounted for under cost method.
On January 1, 2020, Mega gained the ability to exercise significant influence over financial and operating control of Penny by acquiring an additional 20% of Penny's outstanding ordinary shares for P10,000,000.
The fair value Penny's net assets equalled carrying amount. The fair value of the 10% interest on January 1, 2020 was P6,000,000.
-What is the investment income in 2019?
-What is the investment income in 2020?
-What is the carrying amount of the investment in associate on December 31, 2020?
2) On January 1, 2019, Ram Company acquired 50,000 ordinary shares of another entity for a total consideration of P5,000,000. On October 1, 2019, the entity received from the investee a preference stock dividend of one share for every 5 ordinary shares held. On this date, the market price of the investee's ordinary share was P140 and the market price of the investee's preference share was P100.
-What amount should be reported as investment if preference shares?
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