On January 1, 2020, Bubb Incorporated and Babb Incorporated organized Bebu Company under the provisions of Revised Corporation Code of the Philippines also known as R.A. No. 11232. Bubb Incorporated and Babb Incorporated invested P2,000,000 and P3,000,000 respectively for 40% and 60% capital interest in common stocks of Bebu Company. Bebu Company is established for the purpose of manufacturing a very sensitive microchip which is the most important component of the electronic products of the organizing entities. The decisions on relevant activities of Bebu Company will require unanimous consent of Bubb Incorporated and Babb Incorporated. The organizing entities agreed that they will have rights to the assets and obligations for the liabilities relating to Bebu Company. How Babb Incorporated accounted its investment in Bebu Company? A. It shall be treated as a joint venture under PFRS 11 to be accounted for using Equity Method as provided by PAS 28. B. It shall be treated as an Investment in Associate under PAS 28 to be accounted for using Equity Method. C. It shall be treated as a joint operation under PFRS 11 to be accounted for using the contractual provisions of the joint arrangement D. It shall be treated as business combination under PFRS 3 to be accounted for using Acquisition Method.
On January 1, 2020, Bubb Incorporated and Babb Incorporated organized Bebu Company under the provisions of Revised Corporation Code of the Philippines also known as R.A. No. 11232. Bubb Incorporated and Babb Incorporated invested P2,000,000 and P3,000,000 respectively for 40% and 60% capital interest in common stocks of Bebu Company. Bebu Company is established for the purpose of manufacturing a very sensitive microchip which is the most important component of the electronic products of the organizing entities. The decisions on relevant activities of Bebu Company will require unanimous consent of Bubb Incorporated and Babb Incorporated. The organizing entities agreed that they will have rights to the assets and obligations for the liabilities relating to Bebu Company. How Babb Incorporated accounted its investment in Bebu Company?
A. It shall be treated as a joint venture under PFRS 11 to be accounted for using Equity Method as provided by PAS 28.
B. It shall be treated as an Investment in Associate under PAS 28 to be accounted for using Equity Method.
C. It shall be treated as a joint operation under PFRS 11 to be accounted for using the contractual provisions of the joint arrangement
D. It shall be treated as business combination under PFRS 3 to be accounted for using Acquisition Method.
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