Answered: What Is the investment carrying value…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 26E

See similar textbooks

Related questions

Question

On October 1, 2019, Michael Company purchased 30,000 shares of Jackson Company at P180 per share that reflected book value as of that date. At the time of the purchase, Jackson had 100,000 ordinary shares outstanding. Michael had no ownership interest in Jackson before the purchase. The nine months ending September 30, 2019 of Jackson recorded profit of P2,960,000. For the year ended December 31, 2019, Jackson reported profit of P4,800,000. Jackson paid Michael dividends of P120,000 on December 31, 2019.

For the year 2020. Jackson reported profit of P2,800,000 and paid dividends of P 1,700,000 to its ordinary shareholders.

On January 2, 2021, Michael sold 20,000 ordinary shares of Jackson for P250 per share. For year ended December 31, 2021, the reported profit of Jackson was P4,000,000 and dividends of P40,000 was paid to Michael. Market value of the remaining shares at this time is P2,300,000.

What Is the investment carrying value at December 31. 2020?

a. P6,162,000

b. P5,970,000

c. P5,832,000

d. P5,400,000

2. What is the gain (loss) on the sale of 20,000 shares at January 2. 2021?

a. P1,400,000

b. P1,020,000

c. P1,000,000

d. P892,000

Expert Solution