On January 1, 20x1, ALLEVIATE Co. acquired 30,000 ordinary shares representing 30% interest in LESSEN Co.'s net assets for P12,000,000. At the time of acquisition, LESSEN's net assets had a fair value of P40,000,000 and a carrying amount of P32,000,000. The difference between the fair value and the carrying amount is attributable to a building which has a remaining useful life of 10 years. In 20x1, LESSEN reported profit of P4,000,000 and paid cash dividends of P2,400,000. LESSEN's shares were selling at P400 per share on December 31, 20x1. On July 1, 20x2, ALLEVIATE sold 60% of its investment in LESSEN at the prevailing market price of $480 per share. The retained interest does not give ALLEVIATE significant influence over LESSES; thus, ALLEVIATE reclassified the remaining investment to held for trading securities. LESSEN reported interim profit of P2,000,000 for the six months ended June 30, 20x2. LESSEN reported total profit of P4,800,000 in 20x2 and declared P4,000,000 cash dividend on December 31, 20x2. LESSEN's shares were selling at P540 per share on December 31, 20x2. How much is the total investment-related income recognized in ALLEVIATE's profit or loss in 20x2? 2,640,000 O2,968,000 O 3,360,000 3,780,000

On January 1, 20x1, ALLEVIATE Co. acquired 30,000 ordinary shares representing 30% interest in LESSEN Co.'s net assets for P12,000,000. At the time of acquisition, LESSEN's net assets had a fair value of P40,000,000 and a carrying amount of P32,000,000. The difference between the fair value and the carrying amount is attributable to a building which has a remaining useful life of 10 years. In 20x1, LESSEN reported profit of P4,000,000 and paid cash dividends of P2,400,000. LESSEN's shares were selling at P400 per share on December 31, 20x1. On July 1, 20x2, ALLEVIATE sold 60% of its investment in LESSEN at the prevailing market price of $480 per share. The retained interest does not give ALLEVIATE significant influence over LESSES; thus, ALLEVIATE reclassified the remaining investment to held for trading securities. LESSEN reported interim profit of P2,000,000 for the six months ended June 30, 20x2. LESSEN reported total profit of P4,800,000 in 20x2 and declared P4,000,000 cash dividend on December 31, 20x2. LESSEN's shares were selling at P540 per share on December 31, 20x2. How much is the total investment-related income recognized in ALLEVIATE's profit or loss in 20x2? 2,640,000 O2,968,000 O 3,360,000 3,780,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On January 1, 20x1, ALLEVIATE Co. acquired 30,000 ordinary shares representing
30% interest in LESSEN Co.'s net assets for $12,000,000. At the time of acquisition,
LESSEN's net assets had a fair value of $40,000,000 and a carrying amount of
$32,000,000. The difference between the fair value and the carrying amount is
attributable to a building which has a remaining useful life of 10 years. In 20x1,
LESSEN reported profit of $4,000,000 and paid cash dividends of $2,400,000.
LESSEN's shares were selling at $400 per share on December 31, 20x1.
On July 1, 20x2, ALLEVIATE sold 60% of its investment in LESSEN at the prevailing
market price of $480 per share. The retained interest does not give ALLEVIATE
significant influence over LESSES; thus, ALLEVIATE reclassified the remaining
investment to held for trading securities. LESSEN reported interim profit of
$2,000,000 for the six months ended June 30, 20x2. LESSEN reported total profit of
$4,800,000 in 20x2 and declared $4,000,000 cash dividend on December 31, 20x2.
LESSEN's shares were selling at P540 per share on December 31, 20x2.
How much is the total investment-related income recognized in ALLEVIATE's profit
or loss in 20x2?
2,640,000
2,968,000
3,360,000
3,780,000

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