On January 1, 2016, Ronald Company purchased 40% of the outstanding ordinary shares of New Company, paying ₱6,400,000 when the carrying amount of the net assets of New Company equaled ₱12,500,000. The difference was attributed to equipment which had carrying amount of ₱3,000,000 and a fair market value of ₱5,000,000 and to building which had a carrying amount of ₱2,500,000 and a fair value of ₱4,000,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During 2016, New Company reported net income of ₱5,000,000 and paid dividends of ₱2,500,000. What amount should be reported as investment income for 2016? a. 2,000,000 b. 1,000,000 c. 1,800,000 d. 1,750,000
On January 1, 2016, Ronald Company purchased 40% of the outstanding ordinary shares of New Company, paying ₱6,400,000 when the carrying amount of the net assets of New Company equaled ₱12,500,000.
The difference was attributed to equipment which had carrying amount of ₱3,000,000 and a fair market value of ₱5,000,000 and to building which had a carrying amount of ₱2,500,000 and a fair value of ₱4,000,000.
The remaining useful life of the equipment and building was 4 years and 12 years, respectively.
During 2016, New Company reported net income of ₱5,000,000 and paid dividends of ₱2,500,000.
What amount should be reported as investment income for 2016?
a. 2,000,000
b. 1,000,000
c. 1,800,000
d. 1,750,000
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