Reference no: EM132839610
On January 1,2015 Melanie Company acquired 25% of the outstanding shares of an investment at a total cost of P 7,000,000. At the time, the carrying amount of net assets of the investee totaled P 24,000,000.
The investee owned equipment with 5-year remaining life and with a fair value of P2,000,000 more than carrying amount. The investee owned land with a fair value of P1,000,000 more than carrying amount The investee earned net income of P5,000,000 evenly during the current year. The investee declared and paid cash dividend of P 3,000,000 to shareholders at year-end. The fair value of the investment at year-end is P7,500,000.
Problem 1: What is the goodwill arising from the investment in associate?
a. 750,000
b. 500,000
c. 250,000
d. 0
Problem 2: What is the investment income for 2015?
a. 1,250,000
b. 1,150,000
c. 900,000
d. 650,000
Problem 3: What s the carrying amount of the investment on December 31, 2015?
a. 7,400,000
b. 7,500,000
c. 7,000,000
d. 8,150,000
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