CA Inter P1 · Chapter 8 · Question 7 of 10
Case: Ankur Ltd acquired 30% of Bela Ltd, giving it significant influence, for ₹15,00,000 at the start of the year (no goodwill or capital reserve arose). Bela Ltd earned a profit of ₹8,00,000 and paid a dividend of ₹2,00,000 during the year. Under AS 23, the carrying amount of the investment in Ankur Ltd's consolidated financial statements at year end is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) ₹16,80,000
Explanation
Under the equity method, the investment is initially recorded at cost and adjusted for the investor's share of post-acquisition profits, while distributions received reduce the carrying amount. Carrying amount = 15,00,000 + 30% x 8,00,000 (2,40,000) - 30% x 2,00,000 (60,000) = ₹16,80,000.
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