1.

Eddie Company acquired 30% of ABC Corporations share for P8,000,000 on July 1, 2020. ABC Corporation's identifiable net assets on the date of acquisition are P20,000,000. The fair value of the corporation's net assets is the same as its carrying amount except for the following:

a. Equipment is undervalued by P2,000,000.

b. Inventory's fair value is P2,000,000 greater than its carrying amount.

The equipment has a remaining life of 4 years and depreciated using the straight-line method. At the end of 2020, all inventories at the acquisition date are entirely sold.

On November 30, ABC Corporation pays a P2,000,000 dividend to its shareholders. During the year, ABC Corporation reported a net income of P5,000,000, 40% of these were earned in the first half of the year. The fair value of ABC Corporation's shares held by Guillen at the end of 2020 is P8,250,000.

On January 1, 2021, Eddie Company sold half of its ownership from ABC Corporation for P5,000,000. During 2021, ABC Corporation reported a net income of P6,000,000 and paid a dividend of P3,000,000. The fair value of the ABC Corporation's shares held by Guillen at the end of 2021 is P5,100,000.

Requirements:

1. Necessary journal entries to record the above transactions?

2. What is the carrying value of the investment on December 31, 2020? December 31, 2021?

2.

On January 1, 2020, Evelyn Company acquired 10,000 shares of GHI Corporation for P600,000. GHI Corporation has the following equity account on January 1, 2020.

10% Non-Cumulative Preference Shares, par value P100; Authorized shares, 100,000;

Issued and outstanding, 50,000 shares - P 5,000,000

Ordinary Shares, P50 par value; Authorized shares, 500,000; - 25,000,000

Issued and outstanding, 75,000 shares

Retained Earnings - 10,000,000

On January 1, 2021, Evelyn acquired an additional 5,000 shares of GHI Corporation for P300,000. The acquisition resulted in 20% ownership, which is considered significant since Evelyn was able to get a seat in the board of directors of GHI Corporation.

GHI Corporation has the following fair values of its shares as follows:

2020 - P65 per share

2021 - P72 per share

GHI Corporation reported the following at year-end:

Net Income Dividends

2020 P5,000,000 P2,000,000

2021 6,500,000 3,000,000

Requirements:

1. Necessary journal entries to record the above transactions?

2. What is the carrying value of the investment on December 31, 2020? December 31, 2021?

3. How much is the income from investment in 2020? 2021?