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Vince Company invested P2,000,000 in Alfred Company for 25% interest. Alfred paid out 40% of net income in dividends each year. The investment account showed the following details: Initial cost                                                                   P5,000,000 Debit to the investment account                                  1,000,000 Credit to the investment account                                 ( 400,000)  Investment balance at year-end                                 P5,600,000 What amount of net income was reported by Alfred?   a. P4,000,000 b. P1,600,000

Vince Company invested P2,000,000 in Alfred Company for 25% interest. Alfred paid out 40% of net income in dividends each year. The investment account showed the following details: Initial cost                                                                   P5,000,000 Debit to the investment account                                  1,000,000 Credit to the investment account                                 ( 400,000)  Investment balance at year-end                                 P5,600,000 What amount of net income was reported by Alfred?   a. P4,000,000 b. P1,600,000

FINANCIAL ACCOUNTING
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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 Vince Company invested P2,000,000 in Alfred Company for 25% interest. Alfred paid out 40% of net income in dividends each year. The investment account showed the following details:

Initial cost                                                                   P5,000,000

Debit to the investment account                                  1,000,000

Credit to the investment account                                 ( 400,000) 

Investment balance at year-end                                 P5,600,000

What amount of net income was reported by Alfred?

 

a.

P4,000,000

b.

P1,600,000

c.

P2,400,000

d.

P5,600,000

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