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What is the carrying value of investment in king inc shares

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Reference no: EM132789463

Prince Inc. acquired 100,000 ordinary shares of Queen Corp. for P5 per share and 250,000 ordinary shares of King Inc. for P10 per share on January 2, 2017. Both Queen Corp. and King Inc. have 1.000,000 ordinary shares outstanding. The book values of the net assets of Queen Corp. and King Inc. on the acquisition date were P4.5M and P9M, respectively. The fair values of the net assets of both Queen Corp. and King Inc. approximated their book values on the acquisition date, except for one of King's depreciable asset having a remaining life of 5 years. which was understated by P500,000.

Both securities are being held as long-term investments. Your investigation revealed the following changes in Retained Earnings of Queen Corp. and King Inc. for 2017 and 2018 based on their respective audited financial statements:

 

Queen Corp.

King Inc.

Retained earnings (Deficit), I/1/17

P2,000,000

(P350,000)

Cash Dividends, 2017

(250,000)

 

Profit for 2017

400.000

650,000

Retained earnings, 12/31/17

P2,150,000

P300,000

Cash dividends, 2018

(300,000)

(100,00)

Profit for 2018

600.000

250.000

Retained earnings, 12/31/18

P2 450 000

P250.000

Market values of shares: 12/31/17

P7.00 per sh.

P12.00 per sh.

Market values of shares: 12/31/18

6.50 per sh.

15.00 per sh.

Problem 1: What is the carrying value of Investment in King Inc. shares in 2018?

Reference no: EM132789463

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