ABC purchases 5 percent of XYZ's outstanding stock on October 1, 2001 for P74,750. An additional 10 percent of XYZ is acquired for P149,000 on July 1, 2002. Both of these purchases were accounted for as available-for-sale investments. A final 20 percent is purchased on December 31, 2003, for P342,000. With this final acquisition, Len achieves the ability to significantly influence the decision-making process of XYZ.

XYZs stockholders equity has a book value of P1,000,000 as of January 1, 2001. Information follows concerning the operations of this company for the 2001-2003 period. Assume all income occurred evenly throughout the years and dividends were paid every November 1 of each year.

Year Reported Income Dividends

2001 P200,000 P80,000

2002 300,000 160,000

2003 240,000 90,000

On XYZs financial records, the book values of all assets and liabilities are the same as their fair market values. Any excess is allocated to unrecorded patent and is to be amortized over a 15-year period. Amortization for a portion of a year should be based on months.

1. How much income from this investment was recognized on the books of ABC for the year 2001?

2. How much income from this investment was recognized on the books of ABC for the year 2002?

3. How much income from this investment was recognized on the books of ABC for the year 2003?

4. Determine the balance of investment that will be reported on the balance sheet of ABC for the year ended December 31, 2003.