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What is the total amount that should be reported in profit or loss relating to the securities during 2020?Single choice. P 640,000 P 150,000 P 190,000 P 340,000 How much is the gain or loss to be recognize on the sale of 50% of DEF shares? P 20,000 gain 0 P 10,000 loss P 190,000 gain

What is the total amount that should be reported in profit or loss relating to the securities during 2020?Single choice. P 640,000 P 150,000 P 190,000 P 340,000 How much is the gain or loss to be recognize on the sale of 50% of DEF shares? P 20,000 gain 0 P 10,000 loss P 190,000 gain

Cornerstones of Financial Accounting
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
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What is the total amount that should be reported in profit or loss relating to the securities during 2020?Single choice.

  • P 640,000
  • P 150,000
  • P 190,000
  • P 340,000

How much is the gain or loss to be recognize on the sale of 50% of DEF shares?

  • P 20,000 gain
  • 0
  • P 10,000 loss
  • P 190,000 gain
ABC Company acquired 60,000 shares of DEF Incorporated's 200,000 ordinary shares on January 2, 2019 for P 4,000,000 when the net assets of DEF Incorporated was P 12,000,000. The excess of acquisition cost over the book value of recorded assets is attributable to goodwill. This acquisition gave ABC Company significant influence over DEF Incorporated. DEF Incorporated earned P 2,000,000 net income and paid dividends of P 600,000 in 2019. On January 1, 2020, ABC Company sold 50% of its investment at P 80 per share and subsequently lost significant influence over DEF and so classified the remaining shares as equity investments at fair value through other comprehensive income.DEF Incorporated earned P 3,000,000 net income in 2020. DEF Incorporated also paid dividends of P 1,000,000 in 2020. Market value of DEF Incorporated's ordinary shares is P 90 on December 31, 2020.
Transcribed Image Text:ABC Company acquired 60,000 shares of DEF Incorporated's 200,000 ordinary shares on January 2, 2019 for P 4,000,000 when the net assets of DEF Incorporated was P 12,000,000. The excess of acquisition cost over the book value of recorded assets is attributable to goodwill. This acquisition gave ABC Company significant influence over DEF Incorporated. DEF Incorporated earned P 2,000,000 net income and paid dividends of P 600,000 in 2019. On January 1, 2020, ABC Company sold 50% of its investment at P 80 per share and subsequently lost significant influence over DEF and so classified the remaining shares as equity investments at fair value through other comprehensive income.DEF Incorporated earned P 3,000,000 net income in 2020. DEF Incorporated also paid dividends of P 1,000,000 in 2020. Market value of DEF Incorporated's ordinary shares is P 90 on December 31, 2020.
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