Answer to Question #205985 in Accounting for Kkkk

Question

On January 1,2018 Solenn Company acquired as a long-term investment for ₱1,400,000 a 40% interest in Lovie Company when the fair value of Love’s net assets was ₱3,500,000. Lovie Company reported the following net losses:

2018 ₱1,000,000

2019 1,4000,000

2020 1,600,000

2021 800,000

On January 1,2020 Solenn company made cash advances of ₱400,000 to Lovie Company. On December 31,2021 it is not expected that solenn company will provide further financial support for lovie company.

What amount should Solenn Company report in 2021 as loss from investment?

Answer 1

Investment in a subsidiary

If an entity controls 20% or more of the voting power on an investee (directly or through subsidiaries), it will be assumed that the investor has considerable influence until it can be convincingly proved that this is not the case.

When an investor owns 20% to 50% of another entity's stock, he or she often wields substantial power.

The amount should be reported by tenants as investment income for the year 2021 is $ 320,000