Reference no: EM132892484

In October 1, 2020, Only Company acquired 30% of the outstanding ordinary shares of One Company for P2,706,000. This investment gave Only Company the ability to exercise significant influence over One Company. The book value of the acquired shares was P2,400,000. At the time of acquisition, One Company's building was reported at its carrying value with a remaining useful life of ten years. The fair value of this building over its carrying value exceeds by P1,500,000. One Company's accounting policy is to continually measure this building under the cost model. For the year ended December 31, 2020, One Company reported net of tax income of P900,000 and paid cash dividends of P100,000 on its ordinary share and thereafter issued 5% stock dividend. Income tax rate is 32%.

Question 1: What is the carrying value of Only's Investment in One Company account on December 31, 2020?

a) P2,706,000 c) P2,735,850

b) P2,712,900 d) P2,743,500