5. An entity owned 100% of another entity's preference shares and 20% of ordinary shares. The...

  

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5. An entity owned 100% of another entity's preference shares and 20% of ordinary shares. The investee's share capital outstanding at year-end included P5,000,000 of 10% cumulative preference shares and P10,000,000 of ordinary shares. The investee reported net income of P8,000,000 for the current year. No dividend was declared for both preference and ordinary shares during the current year. What amount should be reported as investment income for the current year? 6. On January 1, 2021, an entity acquired a 10% interest in an investee for P3,000,000. The investment was accounted for under the cost method. During 2021, the investee reported net income of P4,000,000 and paid dividend of P1,000,000. On January 1, 2022, the entity acquired a further 15% interest in the investee for P8,500,000. On such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair value of the 10% existing interest was P3,500,000. The fair value of the net assets of the investee is equal to carrying amount. The investee reported net income of P8,000,000 for 2022 and paid dividend of P6,000,000 on December 31, 2022. 1. What amount of income should be recognized by the investor in 2021? 2. What is the implied goodwill in 2022? 3. What total amount of income should be recognized by the investor in 2022? 4. What is the carrying amount of the investment in associate on December 31, 2022? 5. An entity owned 100% of another entity's preference shares and 20% of ordinary shares. The investee's share capital outstanding at year-end included P5,000,000 of 10% cumulative preference shares and P10,000,000 of ordinary shares. The investee reported net income of P8,000,000 for the current year. No dividend was declared for both preference and ordinary shares during the current year. What amount should be reported as investment income for the current year? 6. On January 1, 2021, an entity acquired a 10% interest in an investee for P3,000,000. The investment was accounted for under the cost method. During 2021, the investee reported net income of P4,000,000 and paid dividend of P1,000,000. On January 1, 2022, the entity acquired a further 15% interest in the investee for P8,500,000. On such date, the carrying amount of the net assets of the investee was P36,000,000 and the fair value of the 10% existing interest was P3,500,000. The fair value of the net assets of the investee is equal to carrying amount. The investee reported net income of P8,000,000 for 2022 and paid dividend of P6,000,000 on December 31, 2022. 1. What amount of income should be recognized by the investor in 2021? 2. What is the implied goodwill in 2022? 3. What total amount of income should be recognized by the investor in 2022? 4. What is the carrying amount of the investment in associate on December 31, 2022?

Answer rating: 100% (QA)

Answer Investment Income for the Current Year Since no dividends were declared for both preference a... View the full answer