Solution for QID #20883: On January 1, 2020, Entity A acquired 90% of outstanding ord | StudyHelpMe

On January 1, 2020, Entity A acquired 90% of outstanding ordinary shares of Entity B at a price of P900,000. Entity A paid P20,000 costs related to acquisition of shares. At the acquisition date, the net assets of Entity B were reported at P950,000. All the assets of Entity B are properly valued except for a machinery which is undervalued by P150,000. The machinery has a remaining useful life of 5 years. For the year ended December 31, 2020, Entity B reported net income of P200,000 and declared dividends in the amount of P30,000. The fair value of Investment in Entity B on December 31, 2020 is P1,000,000 while the cost of disposal is 5%. Entity A voluntarily prepared its separate financial statements. 66) If Entity A elects cost method to account its Investment in Entity B in its separate financial statements, what is the carrying amount of the Investment in Entity B on December 31, 2020? A.      900,000 B.       920,000 C.    1,000,000 D.      950,000 67)      What is the investment income for 2020 if Entity A elects cost method to account its Investment in Entity B in its separate financial statements? A.       7,000 B.      27,000 C.    180,000 D.   107,000 68)     If Entity A elects fair value model to account its Investment in Entity B in its separate financial statements, what is the carrying amount of the Investment in Entity B on December 31, 2020? A.      900,000 B.       920,000 C.   1,000,000 D.      950,000 69)     What is the net effect in profit or loss for 2020 if Entity A elects fair value model to account its Investment in Entity B in its separate financial statements? A.       7,000 B.      27,000 C.    180,000 D.   107,000