2. On July 1, 2021, Mickaella Company, an SME, acquired 20% of the outstanding ordinary shares ofanother entity for P5,000,000. The book value of the acquired share was P4,000,000. The excess ofcost over book value was attributable to an identifiable intangible asset which was undervalued onthe investee's statement of financial position and which had a remaining useful life of 5 years. For theyear ended December 31, 2021, the investee reported net income of P6,000,000 and paid cashdividends of P1,000,000 on its ordinary share capital and issued 10% share dividend on December 31,2021. The entity elected to use the equity method in accounting for this investment.What is the carrying value of the investment in associate at December 31, 2021?

It is the method used to treat investments in associate companies. This method is used when an…

Answered: On July 1, 2021, Mickaella Company, an…

On July 1, 2021, Mickaella Company, an SME, acquired 20% of the outstanding ordinary shares of another entity for P5,000,000. The book value of the acquired share was P4,000,000. The excess of

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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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

2. On July 1, 2021, Mickaella Company, an SME, acquired 20% of the outstanding ordinary shares of
another entity for P5,000,000. The book value of the acquired share was P4,000,000. The excess of
cost over book value was attributable to an identifiable intangible asset which was undervalued on
the investee's statement of financial position and which had a remaining useful life of 5 years. For the
year ended December 31, 2021, the investee reported net income of P6,000,000 and paid cash
dividends of P1,000,000 on its ordinary share capital and issued 10% share dividend on December 31,
2021. The entity elected to use the equity method in accounting for this investment.
What is the carrying value of the investment in associate at December 31, 2021?

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