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Chu Company acquired a 40% interest in Wawa Company for P1,700,000 on January 1, 2018....

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Accounting

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Chu Company acquired a 40% interest in Wawa Company for P1,700,000 on January 1, 2018. The shareholders' equity of Wawa Company on January 1 and December 31, 2018 is presented below: January 1 December 31 Share capital 3,000,000 3,000,000 Revaluation surplus 1,300,000 Retained earnings 1,000,000 1,500,000 On January 1, 2018, all the identifiable assets and liabilities of Wawa Company were recorded at fair value. Wawa Company reported profit of P650,000, after income tax expense of P350,000 and paid dividends of P150,000 to shareholders during the current year. The revaluation surplus is the result of the revaluation of land recognized by Wawa Company on December 31, 2018. Additionally, depreciation is provided by Wawa Company on the diminishing balance method whereas Chu Company uses the straight-line. Had Wawa Company used the straight line, the accumulated depreciation would be increased by P200,000. The tax rate is 35%. Chu Company should report its investment in associate on December 31, 2018 atp

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