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AB Company bought 20% of CD Corporation's ordinary shares on January 1, 2021 for P20,000,000. Carrying amount of CD's net assets at purchase date totaled P60,000,000. Fair value and carrying amounts were the same for all items except for plant and inventory, for which fair values exceed their carrying amounts by P15,000,000 and P5,000,000 respectively. The plant has a 5-year life. All inventory was sold during 2021. Goodwill, if any, has an indefinite life. During 2021, CD reported profit of P40,000,000 and paid a P15,000,000 cash dividend. What amount should AB report as investment income for 2021? A.P6,000,000 B.P7,200,000 C.P7,400,000 D.P6,400,000

AB Company bought 20% of CD Corporation's ordinary shares on January 1, 2021 for P20,000,000. Carrying amount of CD's net assets at purchase date totaled P60,000,000. Fair value and carrying amounts were the same for all items except for plant and inventory, for which fair values exceed their carrying amounts by P15,000,000 and P5,000,000 respectively. The plant has a 5-year life. All inventory was sold during 2021. Goodwill, if any, has an indefinite life. During 2021, CD reported profit of P40,000,000 and paid a P15,000,000 cash dividend. What amount should AB report as investment income for 2021? A.P6,000,000 B.P7,200,000 C.P7,400,000 D.P6,400,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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 AB Company bought 20% of CD Corporation's ordinary shares on January 1, 2021 for P20,000,000. Carrying amount of CD's net assets at purchase date totaled P60,000,000. Fair value and carrying amounts were the same for all items except for plant and inventory, for which fair values exceed their carrying amounts by P15,000,000 and P5,000,000 respectively. The plant has a 5-year life. All inventory was sold during 2021. Goodwill, if any, has an indefinite life. During 2021, CD reported profit of P40,000,000 and paid a P15,000,000 cash dividend. What amount should AB report as investment income for 2021?

A.P6,000,000
B.P7,200,000
C.P7,400,000
D.P6,400,000

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