At the beginning of the current year, Big Company purchased 25% of the outstanding ordinary shares of Small company paying P5,000,000. On this date, the carrying amount of the net assets of Small equaled to P16,000,000. The difference was attributed to an excess of fair value over carrying amount of an equipment amounting to P3,000,000. The equipment has a remaining useful life of five years. In addition, Small's inventory had a carrying amount of P3,400,000 but was determined to have a fair value of P4,400,000. 75% of the inventory was sold during the year. At the end of the current year, Small company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What is the carrying amount of the investment at the end of the year?
At the beginning of the current year, Big Company purchased 25% of the outstanding ordinary shares of Small company paying P5,000,000. On this date, the carrying amount of the net assets of Small equaled to P16,000,000. The difference was attributed to an excess of fair value over carrying amount of an equipment amounting to P3,000,000. The equipment has a remaining useful life of five years. In addition, Small's inventory had a carrying amount of P3,400,000 but was determined to have a fair value of P4,400,000. 75% of the inventory was sold during the year. At the end of the current year, Small company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What is the carrying amount of the investment at the end of the year?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 8MC
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Transcribed Image Text:At the beginning of the current year, Big Company purchased 25% of the outstanding ordinary shares of
Small company paying P5,000,000. On this date, the carrying amount of the net assets of Small equaled
to P16,000,000. The difference was attributed to an excess of fair value over carrying amount of an
equipment amounting to P3,000,000. The equipment has a remaining useful life of five years. In addition,
Small's inventory had a carrying amount of P3,400,000 but was determined to have a fair value of
P4,400,000. 75% of the inventory was sold during the year. At the end of the current year, Small
company, reported net income of P1,600,000 and paid cash dividends of P1,000,000. What is the
carrying amount of the investment at the end of the year?
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