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What is the dividend income/investment income for 20x1? a. 88,500  b. 65,000  c. 61,600 d. 40,000

What is the dividend income/investment income for 20x1? a. 88,500  b. 65,000  c. 61,600 d. 40,000

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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What is the dividend income/investment income for 20x1?
a. 88,500 

b. 65,000 

c. 61,600

d. 40,000

On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000. On that date, S Company P300,000 capital stock and P500,000 retained earnings. An undervalued asset attributable to building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Company had book value approximated their fair market value. On January 1, 20x1, P's common stock and retained earnings amounted to P1,000,000 and P800,000, respectively, while S Company's retained earnings is P600,000. | The 20x1 net income and dividends using cost (or initial value) method that was as follows; Net Income Dividends P Company P340,000 P100,000 S Company P150,000 P50,000 On April 1, 20x1, S Company sold equipment with book value of P30,000 to P Company for 60,000. The gain on the sale is included in the net income of S Company indicated above. The equipment is expected to have to have a remaining useful life of five years from the date of sale. On September 30, 20x1, P Company sold machinery with a book value of P40,000 to S Company for P75,000. The gain on the sale is also included in the net income of P company indicated above. The machinery is expected to last for ten (10) years from the date of sale.
Transcribed Image Text:On January 1, 20x0, P Company purchased 80 percent of the outstanding shares of S Company by paying P650,000. On that date, S Company P300,000 capital stock and P500,000 retained earnings. An undervalued asset attributable to building amounting to P75,000 with a remaining life of 25 years. All other assets and liabilities of S Company had book value approximated their fair market value. On January 1, 20x1, P's common stock and retained earnings amounted to P1,000,000 and P800,000, respectively, while S Company's retained earnings is P600,000. | The 20x1 net income and dividends using cost (or initial value) method that was as follows; Net Income Dividends P Company P340,000 P100,000 S Company P150,000 P50,000 On April 1, 20x1, S Company sold equipment with book value of P30,000 to P Company for 60,000. The gain on the sale is included in the net income of S Company indicated above. The equipment is expected to have to have a remaining useful life of five years from the date of sale. On September 30, 20x1, P Company sold machinery with a book value of P40,000 to S Company for P75,000. The gain on the sale is also included in the net income of P company indicated above. The machinery is expected to last for ten (10) years from the date of sale.
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