Reference no: EM132797423
Problem - 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 profits 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 P2,500,000.
Required -
1. What is the share in 2019 net income of the associate assuming that the preference shares are non-cumulative?
2. What is the balance of the associate investment assuming the preference shares are cumulative?
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