On June 30, 2021, Laguna Company purchased 10% of Cavite Company's outstanding ordinary shares for P4,000,000. Laguna is the largest single shareholder in Cavite and Laguna's officers are a majority of Cavite's board of directors. Cavite reported net income of P5,000,000 for 2021 and paid dividends of P1,500,000.

In its December 31, 2021 balance sheet, what amount should Laguna report as investment in Cavite?

a.

4,000,000

b.

3,850,000

c.

4,500,000

d.

4,350,000