Paddle Company purchased in the open market 80% of the share capital of Saddle Company on January 1, 2005 at P50,000 more than the book value of its net assets. The excess was allocated totally to goodwill, which shall be tested for impairment. During the following five years, Saddle Company reported cumulative earnings of P200,000 and paid P50,000 in dividends. On January 1, 2010, minority interest in the net assets of Saddle Company amounts to P70,000. Impairment loss on Goodwill totaled P12,500 to date. Paddle Company uses the equity method of accounting. Assume the use of the modified economic entity approach. 1. The acquisition cost of the investment on January 1, 2005 is: a. P250,000 c. P280,000 b. P280,000 d. P210,000
Paddle Company purchased in the open market 80% of the share capital of Saddle Company on
January 1, 2005 at P50,000 more than the book value of its net assets. The excess was allocated
totally to
During the following five years, Saddle Company reported cumulative earnings of
P200,000 and paid P50,000 in dividends. On January 1, 2010, minority interest in the net assets
of Saddle Company amounts to P70,000. Impairment loss on Goodwill totaled P12,500 to date.
Paddle Company uses the equity method of accounting. Assume the use of the modified
economic entity approach.
1. The acquisition cost of the investment on January 1, 2005 is:
a. P250,000 c. P280,000
b. P280,000 d. P210,000
Step by step
Solved in 2 steps
