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- This topic has 4 replies, 2 voices, and was last updated 1 year ago by FajarP.
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- July 3, 2023 at 10:52 am #687581
Sir, i came across this question in Kaplan kit, to prepare the Csop/l of Laurel Co.
Laurel’s investment income consists of,
– its share of a dividend of $500,000 paid by Rakewood in August 20X6.
– a dividend of $200,000 received from Artic, a 25% owned associate which it has
held for several years. The profit after tax of Artic for the year ended
30 September 20X6 was $2.4m.Parent’s investment income is 500k and sub’s 400k.
And the given answer for the same is,
Investment income (400 × 9
/12) 300k
Income from associate (2,400 × 25% based on underlying earnings) 600kMy question is that why they haven’t deducted the 200k dividend received from the associate but also took the full PAT made by the associate?
Clearly, parents investment income includes the 200k received from the associate, so inorder to avoid double counting of the profit it should be deducted, right?
(I assume what they’ve done is,
Total investment income 500(parents)+400*9/12(sub)-500(dividend from sub) = 300k).
((Sub is acquired part-way through the year))July 8, 2023 at 9:59 am #687751The dividend received from the associate is removed on equity accounting and replaced with the share of the associates profit for the year.
July 11, 2023 at 12:36 pm #687841Okay thanks sir. So the solution given is incorrect, right?
The investment income in the Csop/l will be, 500+400*9/12-500-200= 100k. Am i right?July 12, 2023 at 4:24 pm #687883Yes, that looks correct. Thanks
July 13, 2023 at 6:50 am #687904Okay thanks.
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