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What is the retroactive adjustment to the retained earnings

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Reference no: EM132809140

On January 2, 2019, Pacquiao Corp. acquired 50,000 ordinary shares of Morales Inc. at P325 per share. Morales' books contained the following selected information as of last reporting date, December 81, 2018:

Ordinary shares, P100 par, 200,000 shares issued and outstanding P20,000,000

10% Preference shares, P50 par, 100,000 shares issued and outstanding 5,000,000

Share premium on Ordinary shares 15,000,000

Accumulated pro?ts as of December 31, 2018 20,000,000

Net Income for the year 2018 5,000,000

Dividends were declared and paid on preference shares on December 31, 2018. Morales' Building which had a remaining life of 5 years was understated by P4,000,000 on the acquisition date. Any remaining excess over the book value, is attributable to unidenti?able asset. On December 31, 2019, Morales reported total net income of 32,500,000.

Problem 1: What is the correct carrying value of the investment in bonds as of December 31, 2019?

Problem 2: What is the retroactive adjustment to the retained earnings - beginning as a result of your audit of the investment in the debt security?

Reference no: EM132809140

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