On January 1, 2013, Romeo Company acquired 40% of the ordinary shares of an associate. On such date, assets and liabilities of the investee were recorded at fair value and the acquisition showed that goodwill of P1,000,000 was acquired. 

The investee reported net income of P8,000,000 for 2016. In December 2016, the investee sold inventory costing P3,000,000 to Romeo Company for P5,000,000. The inventory remained unsold by Romeo Company on December 2016. 

On January 1, 2016, the investee sold an equipment to Romeo Company with carrying amount of P2,500,000 for P4,000,000. The remaining life of the equipment is 5 years. 

What amount of investment income should be reported by Romeo Company for 2013?

Answer rating: 100% (QA)

Romeo Company should report investment income of P1000000 for 2013 To arrive at this amount we mu... View the full answer