Reference no: EM132915391

At the beginning of the current year, Moana Company acquired 20% of the outstanding ordinary shares of an investee for P700,000 that gave them the ability to exercise significant influence. The carrying amount of the acquired net assets was P600,000.

• The excess of cost over carrying amount was attributed to an identifiable intangible asset which was undervalued on investee's statement of financial position and which had a remaining useful life of ten years.
• The investee reported net income of P180,000 for the current year and paid cash dividend of P60,000 on the ordinary shares.

Problem 1: What is the carrying amount of the investment in associate at year-end?

Option 1: 700,000

Option 2: 678,000

Option 3: 690,000

Option 4: 714,000

Problem 2: Which of these statements is not true regarding investment in associate achieved in stages?

Group of answer choices

Option 1: The fair value approach should be followed when an associate is acquired in stages.

Option 2: Any unrealized gain or loss at the date the investee becomes an associate is reclassified to retained earnings if the existing interest is accounted for at fair value through other comprehensive income.

Option 3: The fair value of the existing interest plus the cost of the additional interest acquired constitutes the total cost of investment.

Option 4: The existing interest in the associate is measured at cost with any changes included in profit or loss.