Rainbow Company acquired 40% of another entity's shares on January 1, 2021 for P15,000,000. The investee's assets and liabilities at that date were: Carrying amount Fair value Cash Accounts receivable Inventory - FIFO Land Plant and equipment- net Liabilities 1,000,000 4,000,000 8,000,000 5,500,000 14,000,000 ( 7,000,000) 1,000,000 4,000,000 9,000,000 7,000,000 22,000,000 (7,000,000) 25,500,000 36,000,000 The plant and equipment have a 10-year remaining useful life. The inventory was all sold in 2021. The entity sold the land in 2022 for P8,000,000 and reported a gain of P2,500,000. The investee reported net income of P3,000,000 for 2021 and P5,000,000 for 2022. The investee paid P1,000,000 cash dividend on December 31, 2021 and P2,000,000 on December 31, 2022. 1. What amount should be reported as investment income for 2021? a. 400,000 b. 480,000 c. 880,000 d. 800,000 2. What amount should be reported as investment income for 2022? a. 1,080,000 b. 2,280,000 c. 1,680,000 d. 2,880,000 3. What is the carrying amount of the investment in associate on December 31, 2022? a. 15,080,000 b. 15,400,000 c. 15,360,000 d. 15,680,000

Rainbow Company acquired 40% of another entity's shares on January 1, 2021 for P15,000,000. The investee's assets and liabilities at that date were: Carrying amount Fair value Cash Accounts receivable Inventory - FIFO Land Plant and equipment- net Liabilities 1,000,000 4,000,000 8,000,000 5,500,000 14,000,000 ( 7,000,000) 1,000,000 4,000,000 9,000,000 7,000,000 22,000,000 (7,000,000) 25,500,000 36,000,000 The plant and equipment have a 10-year remaining useful life. The inventory was all sold in 2021. The entity sold the land in 2022 for P8,000,000 and reported a gain of P2,500,000. The investee reported net income of P3,000,000 for 2021 and P5,000,000 for 2022. The investee paid P1,000,000 cash dividend on December 31, 2021 and P2,000,000 on December 31, 2022. 1. What amount should be reported as investment income for 2021? a. 400,000 b. 480,000 c. 880,000 d. 800,000 2. What amount should be reported as investment income for 2022? a. 1,080,000 b. 2,280,000 c. 1,680,000 d. 2,880,000 3. What is the carrying amount of the investment in associate on December 31, 2022? a. 15,080,000 b. 15,400,000 c. 15,360,000 d. 15,680,000

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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