ACCA FR · Chapter 13 · Question 5 of 11
Ibex Co bought 30% of Oryx Co for $3,000,000 and has significant influence. Since acquisition Oryx Co has made profits of $1,200,000 and paid dividends of $400,000. The investment has been impaired by $100,000. What is the carrying amount of the investment in associate in the consolidated SFP?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $3,140,000
Explanation
Under the equity method: cost $3,000,000 + share of post-acquisition retained profits 30% x ($1,200,000 - $400,000) = $240,000, less impairment $100,000 = $3,140,000. Dividends received from the associate reduce the carrying amount, so the share of total profit ($360,000) is not used on its own.
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