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Stephen Widberg.
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joynow
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Hi, Sir. Past year Sept 2018 Q4 iii)
Note ii) Daveed purchased a 25% interest in an associate for cash. The associate reported a profit after tax of $16m and paid a dividend of $4m out of these profits in the year end.
Answer: Purchase of associate
Balance (-) profit $16m x 25% (+) dividend received $4m x 25%= $23m -$4m +$1m = $20m ( cost of acquisition)
My question is why the profit has to be minus out and add up the dividend received?
Stephen Widberg
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He seems to like this because it comes up often
STARTING FIGURE + PROFIT – DIVIDEND = ENDING FIGURE (the accounting equation)
STARTING FIGURE = balancing figure in the equation
It does work if you write it as an equation
joynow
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