Question

MAB Company acquires 38% equity interest from BAM Company on January 1, 2020 for P728,000. On December 30, 2020 BAM Company reported a P 720, £000 losses and declared a dividends P 400, 000. December 30, 2021 - Reported profit P 342, 000 - Declared a dividends of P300,000 December 30, 2022 - Reported profit P600, 000 - Declared dividends of P320,000

Answer 1

MAB Company's 38% equity interest in BAM Company acquired for P728,000 has a current value of approximately P630,504.4. The value is obtained by considering changes in profit and dividends over the years.

Step-by-step explanation:

In January 2020, MAB Company acquired a 38% equity interest in BAM Company for P728,000.

To calculate the value of the investment, we need to consider the changes in profit and dividends over the years.

Year 2020:

BAM Company reported a loss of P720,000 and declared dividends of P400,000.

Year 2021:

BAM Company reported a profit of P342,000 and declared dividends of P300,000.

Year 2022:

BAM Company reported a profit of P600,000 and declared dividends of P320,000.

Now, let's calculate the change in the value of the investment:

(Initial investment) + (Dividends received) - (Changes in profit) = Value of investment

For Year 2020: P728,000 - P400,000 - (P720,000 * 38%) = P369,600

For Year 2021: P369,600 - P300,000 + (P342,000 * 38%) = P433,160.4

For Year 2022: P433,160.4 - P320,000 + (P600,000 * 38%) = P630,504.4

The value of the 38% equity interest in BAM Company acquired by MAB Company is approximately P630,504.4.