Malay, Inc., a Philippine company, acquired 100 percent common stock of an Indian company on January 1, 2020, for P402,000. The Indian subsidiary’s net assets amounted to 300,000 rupees on the date of acquisition. On January 1, 2020, the book values of its identifiable assets and liabilities approximated their fair values. On December 31, 2020, the Indian subsidiary’s adjusted trial balance, translated into Philippine Pesos, contained P12,000 more debits than credits. The Indian subsidiary reported income of P25,000 rupees for 2020 and paid a cash dividend of 5,000 rupees on November 30, 2020. Included on the Indian subsidiary’s income statement was depreciation expense of 2,500 rupees. Malay uses the basic equity method of accounting for its investment in the Indian subsidiary and determined that goodwill in the first year had an impairment loss of 10 percent of its initial amount. Exchange rate at various dates during 2020 are as follows: January 1 1 rupee = P1.20 November 30 1 rupee = P1.30 December 31 1 rupee = P1.32 Average for 2020 1 rupee = P1.24 1. What amount should Malay record as “income from subsidiary” based on Indian subsidiary’s reported comprehensive income?
Malay, Inc., a Philippine company, acquired 100 percent common stock of an Indian company
on January 1, 2020, for P402,000. The Indian subsidiary’s net assets amounted to 300,000
rupees on the date of acquisition. On January 1, 2020, the book values of its identifiable
assets and liabilities approximated their fair values. On December 31, 2020, the Indian
subsidiary’s adjusted
debits than credits. The Indian subsidiary reported income of P25,000 rupees for 2020 and
paid a cash dividend of 5,000 rupees on November 30, 2020. Included on the Indian
subsidiary’s income statement was
basic equity method of accounting for its investment in the Indian subsidiary and determined
that
Exchange rate at various dates during 2020 are as follows:
January 1 1 rupee = P1.20
November 30 1 rupee = P1.30
December 31 1 rupee = P1.32
Average for 2020 1 rupee = P1.24
1. What amount should Malay record as “income from subsidiary” based on Indian subsidiary’s
reported comprehensive income?
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