Meycauayan Inc. acquired 50,000 shares of AAA stock for P5 per share and 125,000 shares of BBB
Question:
Meycauayan Inc. acquired 50,000 shares of AAA stock for P5 per share and 125,000 shares of
BBB stock for P10 per share on January 2, 2019. Both AAA Inc. and BBB Corp. have 500,000
shares of no-par common stock outstanding. Both securities are being held as long-term
investments. Changes in retained earnings for AAA and BBB for 2019 and 2020 are as follows:
AAA, Inc. BBB Corp.
Retained earnings (deficit), 1/1/19 P1,000,000 (P175,000)
Cash dividends, 2019 (125,000) -
Net income, 2019 200,000 325,000
Retained earnings, December 31, 2019 1,075,000 150,000
Cash dividends, 2020 (150,000) (50,000)
Net income, 2020 300,000 125,000
Retained earnings, December 31, 2020 P1,225,000 P 225,000
Market value of stock:
12/31/05 P7.00 P12.00
12/31/06 6.50 15.00 The dividend income from the investment in AAA, Inc. in 2020 is