ACCA Applied Knowledge · Financial Accounting · Associates
Zeta plc bought 30% of Theta Ltd on 1 January for $900,000. Theta's profit for the year ended 31 December was $400,000, and it paid a dividend of $100,000 during the year. Zeta has significant influence. What is the carrying amount of the investment in associate in Zeta's consolidated statement of financial position at 31 December?
The carrying amount is $990,000. Cost of $900,000 is increased by the 30% share of profit of $120,000 and reduced by the 30% share of dividends of $30,000, because dividends received are a return of the investment under the equity method.
- A$990,000Correct
- B$1,020,000
- C$930,000
- D$900,000
Explanation
Share of profit is 30% × 400,000 = 120,000. Dividend received is 30% × 100,000 = 30,000, which reduces the carrying amount. Carrying amount = 900,000 + 120,000 − 30,000 = 990,000. Ignoring the dividend gives 1,020,000.
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