Reference no: EM132738322
Question: On January 1, 2018, Entity A acquired 30,000 out of 100,000 outstanding ordinary shares of Entity B for P90,000 or 30% interest. For the six months ended June 30, 2018, Entity B reported net income of P40,000.
On July 1, 2018, Entity A acquired additional 60,000 ordinary shares of Entity B or 60% interest at a price of P4 per share or total cost of P240,000. Entity A paid P20,000 acquisition related costs and P10,000 indirect cost of business combination.
The acquisition price per share of the additional shares clearly reflected the fair value of the existing interest of Entity A in Entity B. It is the policy of Entity A to initially measure the non-controlling interest in net assets of the acquiree at fair value. The fair value of the non-controlling interest in ne assets of the acquiree is reliably measured at P50,000.
At the acquisition date, the net assets of Entity B were reported at P400,000. An asset of Entity B was overvalued by P50,000 while one liability was overvalued by P30,000.
What is the gain on remeasurement of the existing Investment in Entity B as a result of step acquisition
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