Question 6 On June 1, 2020, Ping Corp. purchased 10,000 of Pong’s 50,000 outstanding shares at a price of P6.00 per share. Pong had earnings of P3,000 per month during 2020 and paid dividends of P10,000 on March 1, 2020 and P12,500 on December 1, 2020.  The fair value of Pong’s shares was P6.50 per share on December 31, 2020.   Which statement is correct? Group of answer choices Assuming that the investment is FVTOCI, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P7,500. Assuming that the investment is an associate, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P3,600. After all closing entries for 2020 are completed, the effect of the increase in fair value on total shareholders' equity would be the same amount under the FVTOCI and FVTPL approaches. Assuming that the investment is FVTPL, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P2,500.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Question 6

On June 1, 2020, Ping Corp. purchased 10,000 of Pong’s 50,000 outstanding shares at a price of P6.00 per share. Pong had earnings of P3,000 per month during 2020 and paid dividends of P10,000 on March 1, 2020 and P12,500 on December 1, 2020.  The fair value of Pong’s shares was P6.50 per share on December 31, 2020.

 

Which statement is correct?

Group of answer choices
Assuming that the investment is FVTOCI, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P7,500.
Assuming that the investment is an associate, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P3,600.
After all closing entries for 2020 are completed, the effect of the increase in fair value on total shareholders' equity would be the same amount under the FVTOCI and FVTPL approaches.
Assuming that the investment is FVTPL, the total effect on Ping’s profit or loss for the year ended December 31, 2020 is P2,500.
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