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On 1 June 20X3, S acquired 25,000 equity shares in A for $300,000. At the date of acquisition, A had in issue
100,000 $1 equity shares. A generated profits for the year of $235,000 and paid a dividend of $40,000.
Calculate the carrying amount of the investment in associate to appear in the group statement of
financial position as at 31 December 20X3, assuming the profits accrue evenly during the year.Hi,
If you could please look to attempt the question first I can then look to see if you are correct and point you in the direction of where you might be going wrong. I’m not available to just answer full questions for you.
I’d recommend that you look to use equity accounting to start with.
Thanks
On 1 June 20X3, S acquired 25,000 equity shares in A for $300,000. At the date of acquisition, A had in issue
100,000 $1 equity shares. A generated profits for the year of $235,000 and paid a dividend of $40,000.
Calculate the carrying amount of the investment in associate to appear in the group statement of
financial position as at 31 December 20X3, assuming the profits accrue evenly during the year. here is how i solved:
300k + (235k*7/12*25%)=$334,271but it is asked about group fin statements and i guess dividend paid shouldnt be deducted as it is group statement and not parent’s individual. but my answer is not the same with the answer in the end of the book.
here is how it looks like:
300k+(235k*25%*6/12) – (40k*25%)=$319,375please help me to understand the difference. from June 1 to Dec 31 – 7 month, aren’t they?
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