Reference no: EM132772158
Problem 1: On January 1, 2011, SM Co. acquired 30,000 out of 100,000 outstanding common stocks of PLDT Co. at a price of P1,490,000. As of such date, the net asset of PLDT Co. is reported at P4,000,000. However, PLDT Co.'s building with remaining useful life of 10 years is understated by P1,500,000 while its equipment with remaining useful life of 4 years is overstated by P500,000. For the year ended December 31, 2011, PLDT reported net income of P200,000 and declared cash dividends in the amount of P50,000. What is the investment income to be reported by SM Co. for the year ended December 31, 2011 regarding its investment in PLDT Co.?
a. P52,500
b. P62,500
c. P60,000
d. P15,000
Problem 2: Using the same data in number 1, what is the book value of Investment in PLDT Co. on December 31, 2011 to be reported by SM Co.?
a. P1,535,000
b. P1,547,500
c. P1,545,000
d. P1,537,500
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