On April 1, 2020, LMC Corporation purchased 30% of the voting rights in MLB Company for P5,000,000.

The net assets of MLB Company on this date have a carrying value of P15,000,000. These net assets are fairly valued except for building and inventory. The building's fair value is P1,000,000 greater than its carrying amount, while the inventory is undervalued by P110,000. The building has remaining useful life of 10 years and the 3/4 of the inventories were sold during the current year.

In 2020, MLB Company reported an income of P4,000,000 and paid dividends amounting to P2,000,000.

1.How much is goodwill?

a.167,000

b.500,000

c.0

d.610,000

2.How much is the carrying value of the investment in associate at year-end?

a.P5,545,250

b.P5,252,750

c.P4,352,750

d.P6,145,250

3.Hawk Company purchased 8,000, P1,000 face amount, 9% bonds to yield 10%. The carrying amount of the bonds on January 1, 2020 was P7,800,000. The bonds mature on June 30, 2023 and pay interest semiannually on June 30 and December 31.

The entity sold 4,000 bonds on March 1, 2020 for P3,920,000 after the interest has been received.

What amount should be recognized as gain on sale of bonds?

a.P25,000

b.P20,000

c.P15,000

d.P0

4.On January 1, 2020, Mirage Company acquired P4,000,000 of 12% face amount bonds for P3,767,000 to be held as financial assets at amortized cost with a 14% effective yield.

Interest on bonds is payable annually on December 31 and the bonds mature on January 1, 2024. The effective interest method of amortization is used.

What is the carrying amount of the bond investment on December 31, 2020?

a.P3,814,380

b.P3,767,000

c.P4,000,000

d.P3,719,620