Answered: Question: On Januar

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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Question:

On January 1, 20x1, POSTULATE Co. acquired 10,000 shares representing a 10% interest in DEMAND, Inc.'s 100,000 outstanding shares for ₱3,200,000. In 20x1, DEMAND reported profit of ₱20,000,000 and declared and paid dividends of ₱4,000,000. The investment was initially classified as investment in held for trading securities. The fair value of the shares on December 31, 20x1 was ₱340 per share.

On July 1, 20x2, POSTULATE Co. acquired additional 15,000 shares of DEMAND, Inc. at ₱280 per share (the fair value on this date), resulting to an increase in its ownership interest to 25%. The transaction did not give rise to any goodwill or negative goodwill. In 20x2, DEMAND reported profit of ₱24,000,000, of which ₱16,000,000 were earned in the second half of the year. In addition, DEMAND declared and paid dividends of ₱4,000,000 on December 31, 20x2. The DEMAND shares were quoted at ₱360 per share on December 31, 20x2.

How much are the (1) total amount recognized in profit or loss in 20x2 in relation to the investment; and (2) carrying amount of the investment on Dec. 31, 20x2?

Question options:

3,400,000; 10,000,000

4,600,000; 12,400,000