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Investment in associate exercises

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EXERCISES – INVESTMENT IN ASSOCIATE 1 In January 2020, Farley Company acquired 20% of the outstanding ordinary shares of Davis Company for P8,000,000. This investment gave Farley the ability to exercise significant influence over Davis. The carrying amount of the acquired shares was P6,000,000. The excess of cost over carrying amount was attributed to a depreciable asset which was undervalued on Davis’ statement of financial position and had a remaining useful life of ten years. For the year ended December 31, 2020, the investee reported net income of P1,800,000 and paid cash dividends of P400,000 and thereafter issued a 5% bonus issue. What is the carrying amount of the investment in associate on December 31, 2020? 8,080,000 2 On January 1, 2020, Well Company purchased 10% of Rea Company’s outstanding ordinary shares for P4,000,000. Well is the largest single shareholder in Rea and Well’s officers are a majority of Rea’s board of directors. The investee reported net income of P5,000,000 for 2020 and paid dividends of P1,500,000. On December 31, 2020, what amount should be reported as investment in Rea Company? 4,350,000 3 On July 1, 2020, Denver Company purchased 30,000 shares of Eagle Company’s 100,000 outstanding shares for P200 per share. On December 15, 2020, the investee paid P400,000 in dividends to the ordinary shareholders. The investee’s net income for the year ended December 31, 2020 was P1,200,000, earned evenly throughout the year. What a ...
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