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Hi Chris,
In theis question it is said that “Minny received a dividend of 2M which was credited to OCE.
In the solution, the adjustment is just to transfer the dividend to Retained Earnings.My understanding is that since we have significant influence, we would recognise a profit from the associate at year end of 4,5
Dr Investment
Cr PLOnce a dividend is received we would:
Dr Bank
Cr InvestmentThe solution says the Dividend should have been credited to PL.
Can you please explain this?
Hi,
If we receive a dividend then we DR Bank CR Retained earnings in the individual accounts. As they have credited it to other comprehensive income incorrectly we need to correct this through retained earnings and then we equity account for the associate.
Thanks
So I see the problem is that in their individual accounts they accounted for the investment at cost and not equity accounting as was my understanding.
Am I right?
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