What amount should Justine Company report as investment in associate on December 31, 2020?
What amount should Justine Company report as investment in associate on December 31, 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Justine Company, an SME, bought 20% of another entity’s ordinary shares on January 1, 2020 for P5,000,000. Carrying amount of the investee’s net assets at purchase date totaled P16,000,000. Fair value and carrying amount were the same for all items except for land and inventory, for which fair value exceeds carrying amount by P3,000,000 and P1,000,000, respectively. Only one-half of the inventory was sold during 2020. During 2020, the investee reported net income of P4,000,000 and paid a P1,500,000 cash dividend. The policy of the company is to record this type of investment using equity method. What amount should Justine Company report as investment in associate on December 31, 2020?
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