What is the investment income for mega company

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Reference no: EM132817017

On January 1, 2020, Mega Company acquired 10% of the outstanding ordinary shares of Penny Company for P 4,000,000. The investment was appropriately accounted for under cost method.

On January 1,2021, 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 P 10,000,000.

The fair value Penny's net assets equaled carrying amount. The fair value of the 10% interest in January 1, 2021 was P 6,000,000.

For the years ended December 31, 2020 and 2021, the investee reported the following:

2019 2020

Dividends paid 2,000,000 3,000,000

Net income 6,000,000 6,500,000

Question 1: What is the investment income in 2020?

A. P 200,000

B. P 400,000

C. P 600,000

D. P 300,000

Reference no: EM132817017

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