ACCA FA · Chapter 13 · Question 9 of 12
A group bought 30% of an associate for $200,000. Since acquisition, the associate has made profits of $80,000. There has been no impairment. At what amount should the investment in the associate appear in the consolidated statement of financial position?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $224,000
Explanation
Under the equity method, the investment is carried at cost plus the group's share of post-acquisition profits: $200,000 + (30% x $80,000) = $200,000 + $24,000 = $224,000. Adding all of the associate's profits gives $280,000, and leaving it at cost gives $200,000.
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