ACCA Applied Knowledge · Financial Accounting · Associates
On 1 January 20X4 Parent Co bought 30% of Assoc Co for $90,000. For the year ended 31 December 20X4, Assoc Co made a profit after tax of $50,000 and paid a dividend of $20,000. What is the carrying amount of the investment in the associate in the consolidated statement of financial position at 31 December 20X4?
The investment is $99,000. Start with cost of $90,000, add the 30% share of profit of $15,000, and deduct the 30% share of the dividend of $6,000, because dividends received reduce the carrying amount under the equity method.
- A$99,000Correct
- B$90,000
- C$105,000
- D$84,000
Explanation
Share of profit = 30% x 50,000 = 15,000. Dividend received = 30% x 20,000 = 6,000, which reduces the investment. Carrying amount = 90,000 + 15,000 - 6,000 = 99,000. Ignoring the dividend gives 105,000.
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