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Prepare journal entries to recognise these transactions

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Reference no: EM133068346

Question - Investor Ltd acquires 30% of the shares of Associate Ltd on 1 July for $75,000 and has significant influence. Investor Ltd does not prepare consolidated financial statements.

Required - Using the equity method:

a) Prepare a journal entry to recognise the initial investment. Include narrations.

b) During the following financial year, Associate Ltd reported after-tax profit of $52,500 and foreign currency translation reserve (in OCI) increased by $27,000.

Associate Ltd also paid a $19,500 dividend and transferred $10,500 to plant maintenance reserve. Prepare journal entries to recognise these transactions. Include narrations.

c) Calculate the carrying amount of the investment at the end of the first year.

Reference no: EM133068346

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