What amount should be reported as investment income

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Problem

On January 1, 20x1, Pangasinan Co. acquired 90% of outstanding ordinary shares of Siquijor Co. at a price of ?1,800,000. Pangasinan Co. paid ?40,000 costs related to acquisition of shares. At the acquisition date, the net assets of Siquijor Co. were reported at ?1,900,000. All the assets of Siquijor Co. are properly valued except for a machinery which is undervalued by ?300,000. The machinery has a remaining useful life of 5 years. For the year ended December 31, 20x1, Siquijor Co. reported net income of ?400,000 and declared dividends of ?60,000. The fair value of Investment in Siquijor Co. on December 31, 20x1 is ?2,000,000 while the cost of disposal is 5% of fair value. Pangasinan Co. voluntarily prepared its separate financial statements. Get the instant assignment help. What amount should be reported as investment income for 20x1 if Pangasinan Co. elected the cost method to account its Investment in Siquijor Co. in its separate financial statements?

Reference no: EM133920989

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