CA Final · Integrated Business Solutions (Multidisciplinary Case Study with Strategic Management) · Financial Reporting

Case: Nisha Ltd has a 30% interest in Omkar Ltd and significant influence. Omkar reported profit of Rs 200 lakh for the year and paid dividends of Rs 50 lakh. Nisha's investment at start of year was Rs 400 lakh in consolidated statements (equity method). What is the carrying amount at year end?

Under the equity method the investment increases by the investor's share of profit, Rs 60 lakh, and decreases by dividends received, Rs 15 lakh. Closing carrying amount is 400 + 60 - 15, which is Rs 445 lakh.

ARs 445 lakhCorrect
BRs 460 lakh
CRs 400 lakh
DRs 475 lakh

Explanation

Share of profit = 30% x 200 = Rs 60 lakh. Share of dividend = 30% x 50 = Rs 15 lakh, which reduces the carrying amount. Closing = 400 + 60 - 15 = Rs 445 lakh. Rs 460 lakh ignores the dividend adjustment.

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