BP (SME A) and BTS (SME B) each acquired 30% of the outstanding shares of Big Hit Corporation for P202.000, including the transaction cost of P2.000. BP and BTS agreed to a joint control over Big Hit. During the year. Big Hit reported the following:

. Profit for the year - P20,000 • Dividends declared - P4.000

It was determined after a thorough test that due to economic changes, there was an adverse effect to Big Hit during the year. Hence, there appears to be impairment of the investment in the said entity.

Assuming that BP elected to carry the 1 point investment in Big Hit using the Cost Method and the Fair Value of Big Hit at year end P196,000 and cost to sell amounts to P1,800, How much is the impairment loss to be recognized by BP in its investment in Bighit?

A. 0

B. 2,000

C. 7,800

D. 5,800

Assuming that BP elected to use the Fair Value method and the fair value of Bighit at yearend is P196,000 and cost to sell amounts to P1,800. How much is the net profit/loss from the investment?

A. 1,200

B. (1,800)

C. 4,000

D. (4,800)

Assuming that BP elected to use the Fair Value method and the fair value of BigHit at yearend is P196,000 and cost to sell amounts to P1,800. How much is the impairment loss to be recognized for the year?

A. 0

B. 2,000

C. 7,800

D. 12,600

Answer rating: 100% (QA)

Equity Method of Accounting ... View the full answer