On January 1, 2030 entities X and Y each acquired 30% of the ordinary shares that carry voting rights at a general meeting of shareholders of entity Z for P300,000. Entities X and Y immediately agreed to share control over entity Z.

For the year ended December 31, 2030 entity Z recognized a profit of P400,000. On December 31, 2030, Entity Z declared and paid a divided of P150,000 for the year 2020. At December 31, 2030, the fair value of each ventures' investment in entity Z is P425,000. However, there is no published price quotation for entity Z.

On December 31, 2031, entities X and Y lost joint control over entity Z, when entity X reduced its shareholding in entity Z to 15% by selling half of its shares in entity Z to an independent third party for P212,500. Transaction costs of P5,000 were incurred in selling the shares.

Entity A and B account for its investment using equity method.

1. How much is the gain (loss) in derecognition?

2. How much is the carrying amount of the investment of entity X before sale?

Answer rating: 100% (QA)

Gain on derecognition P212500 P... View the full answer