On January 1, 2019, Orange Co. purchased 40% of the outstanding ordinary shares of New Company equaled P12,500,000. The difference was attributed to equipment which had a carrying amount of P3,000,000 and a fair market value of P5,000,000 and to building which had a carrying amount of P2,500,000 and a fair value of P4,000,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During 2020, New Company reported net income of P5,000,000 and paid dividends of P2,500,000. What is the acquisition cost of Orange Co.?

On January 1, 2019, Orange Co. purchased 40% of the outstanding ordinary shares of New Company equaled P12,500,000. The difference was attributed to equipment which had a carrying amount of P3,000,000 and a fair market value of P5,000,000 and to building which had a carrying amount of P2,500,000 and a fair value of P4,000,000. The remaining useful life of the equipment and building was 4 years and 12 years, respectively. During 2020, New Company reported net income of P5,000,000 and paid dividends of P2,500,000. What is the acquisition cost of Orange Co.?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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