Reference no: EM132933603

On January 2, 2020, FIRST Inc. acquired a 15% interest in CLAIMIT Corp. by paying P 8 000 000 for 100 000 ordinary shares. On third ate, the net assets of CLAIMIT corp. totaled P 40M. The fair values of CLAIMIT Corp's identifiable assets and liabilities were equal to their book values. FIRST did not have the ability to exercise significant influence over the operating and financial policies of CLAIMIT. FIRST received dividends of P 1.40 per share from CLAIMIT on October 1, 2020. CLAIMIT reported net income of P5M for the year ended December 31, 2020. FIRST classified the investment as at fair value through other comprehensive income. Market price for the 100 000 shares was P 9M on December 31, 2020. FIRST paid P 30M on January 1, 2021 for 300 000 additional ordinary shares, which represents 25% interest in CLAIMIT. The fair values of CLAIMIT Corp's identifiable assets, net of liabilities, was equal to their book values of P 92M. As a result of this additional acquisition, FIRST has the ability to exercise significant influence over the operating and financial policies of CLAIMIT. FIRST received a dividend of P2.70 per share on October 5, 2021. CLAIMIT reported net income of P 6M for the year ended December 31, 2021. The investment's fair value on December 31, 2021 is P 45M.

Problem 1: The December 31, 2020 statement of financial position would show a carrying amount of the investment in equity securities at

Option 1: 9 000 000
Option 2: 8 750 000
Option 3: None of these
Option 4: 8 000 000
Option 5: 8 610 000

Problem 2: What is the goodwill arising from the acquisition of additional 300 000 shares on January 1, 2021?

Option 1: 9 000 000
Option 2: None of these
Option 3: 0
Option 4: 2 200 000
Option 5: 7 000 000

Problem 3: What is the carrying amount of the investment in associate on December 31, 2021?

Option 1: 39 000 000
Option 2: 40 320 000
Option 3: 39 000 000
Option 4: None of these
Option 5: 38 120 000