On January 1, 2022, Company A acquired 90% of outstanding ordinary shares of Company B at a price of P900,000. Company A paid P20,000 costs related to acquisition of shares. At the acquisition date, the net assets of Company B is reported at P950,000. All the assets of Company B are properly valued except for a machinery which is undervalued by P150,000. The machinery has a remaining useful life of 5 years. For the year ended December 31, 2022, Company B reported net income of P200,000 and declared dividends in the amount of P30,000. Based on the data given by the qualified appraiser, the fair value of Investment in Company B on December 31, 2022 is P1,000,000 while the cost to sell is 5%. Company A voluntarily prepares its separate financial statements. • If Company A elects cost method to account its Investment in Company B in its separate financial statements, what is the book value of the Investment in Company B on December 31, 2022? • If Company A elects cost method to account its Investment in Company B in its separate financial statements, what is the book value of the Investment in Company B on December 31, 2022? • If Company A elects fair value model at profit or loss to account its Investment in Company B in its separate financial statements, what is the book value of the Investment in Company B on December 31,2022?
On January 1, 2022, Company A acquired 90% of outstanding ordinary shares of Company B at a price of
P900,000. Company A paid P20,000 costs related to acquisition of shares.
At the acquisition date, the net assets of Company B is reported at P950,000. All the assets of Company B
are properly valued except for a machinery which is undervalued by P150,000. The machinery has a
remaining useful life of 5 years.
For the year ended December 31, 2022, Company B reported net income of P200,000 and declared
dividends in the amount of P30,000. Based on the data given by the qualified appraiser, the fair value of
Investment in Company B on December 31, 2022 is P1,000,000 while the cost to sell is 5%.
Company A voluntarily prepares its separate financial statements.
• If Company A elects cost method to account its Investment in Company B in its separate financial
statements, what is the book value of the Investment in Company B on December 31, 2022?
• If Company A elects cost method to account its Investment in Company B in its separate financial
statements, what is the book value of the Investment in Company B on December 31, 2022?
• If Company A elects fair value model at profit or loss to account its Investment in Company B in its
separate financial statements, what is the book value of the Investment in Company B on December
31,2022?
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