Exam 31: Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2013 for a cash consideration of $469 000.Bud Ltd's assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows: Share capital 985000 Retained earnings Total shareholders' funds Additional information relating to the period ended 30 June 2015: The opening balance of Bud's retained earnings was $500 000.Bud Ltd had paid a dividend out of pre-acquisition profits of $30 000 during the 2013/2014 period. Bud Ltd had an after-tax profit of $190 000 for the 2014/2015 period. Bud Ltd revalued land during the period,creating an asset revaluation reserve of $100 000. Bud Ltd declared a $60 000 dividend out of post-acquisition profits.This dividend will not be paid until the following period. Flower Ltd accrues the dividends of associates as revenue when they are proposed.The investment has been recorded in Flower's books in accordance with the cost method.What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2015?

Two years after Voss Limited acquired a 30 per cent holding in its associate Warren Limited,the following journal entry appeared in the consolidated accounts of Voss Limited at the end of 2017/2018. Investment in Warren Limited 90000 Revaluation surplus (Land) 90000 Which of the following statements is correct?

When two or more venturers combine their operations,resources and expertise to manufacture,market and distribute jointly a particular product this is likely to be categorised as a jointly controlled entity under AASB 11 Joint Arrangements.

Have Ltd,Ay Ltd and Go Ltd contractually form a joint operation on 1 July 2013 to undertake a bauxite mining venture.The three companies agree to contribute the following amounts of capital to the joint operation in the same proportion as their rights to the assets and outputs: Have Ltd \ 40000000 40\% Ay Ltd \ 35000000 35\% Go Ltd \ 25000000 25\% \ 100000000 100\% The funds are used on 1 July 2013 to purchase the mining site for $50 million and drilling and other heavy machinery for $25 million.The balance of $25 million will be called on by the joint operation manager as required. The following information relates to the year ending 30 June 2014: Total cost of production of $10 000 000.These costs have been deferred in order to amortise them as mining commences. Of the total costs of production all but $3 000 000 have been paid in cash. The joint operation manager called on the joint operators to contribute a further $12 000 000 in total with each joint operator contributing the appropriate portion according to their share in the joint operation (provided above). What entries would be required to record the formation of the joint operation and the transactions for the year ended 30 June 2014?

A factor that should be considered in determining the existence of significant influence would include:

Jay Ltd acquired a 25 per cent interest in Low Ltd on 1 July 2013 for a cash consideration of $177 500.Low Ltd's equity at the time of purchase was as follows: Share capital 540000 Retained earnings Total shareholders' funds Additional information: On 1 July 2013 Low's plant and equipment had a carrying value of $120 000 but a fair value of $140 000.The remaining expected useful life of the plant and equipment at this date was 10 years.Low did not revalue the plant and equipment in its books. For the period ending 30 June 2014 Low Ltd recorded an after-tax profit of $70 000,out of which dividends of $30 000 were proposed in the 2013/2014 period and paid in the 2014/2015 period. For the year ended 30 June 2015 Low Ltd had an after-tax profit of $90 000 out of which it provided for a dividend of $40 000,which has not been paid. Jay Ltd does not accrue the dividends of associates as revenue when they are proposed.The investment has been recorded in Jay's books in accordance with the cost method.What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2015?

X Ltd,Y Ltd and Z Ltd contractually form a joint operation on 1 July 2013 to construct an oil well to extract oil that each of the joint operators will refine.The three companies agree to contribute the following amounts of capital to the joint operation in the same proportion as their rights to the assets and outputs: XLtd \ 25000000 50\% Y Ltd \ 15000000 30\% Z Ltd The funds are used on 1 July 2013 to purchase the land for $20 million and a rig and other equipment for $10 million.The balance of $20 million will be called on by the joint operation manager as required.Y Ltd and Z Ltd borrowed $5 million and $4 million respectively to finance their contributions to the joint operation.What entries would be required to record the establishment of the joint operation and where would these entries be made?

Creed Ltd and Nickleback Ltd enter into a contractual agreement to form a joint arrangement,which is considered to be a joint operation on 1 July 2015.Creed Ltd is to contribute land and equipment and Nickleback Ltd agrees to contribute $8 million.It is agreed that they will share output,assets and future contributions in the ratio 60: 40 (Creed/Nickleback).The contribution by Creed Ltd has an agreed fair value of $9 million for the land and $3 million for the equipment.The book value of the land is $8 million and the net book value of the machinery is $2 million. What are the entries to record the formation of the joint operation in the books of Creed Ltd and Nickleback Ltd?

In accordance with AASB 137 Provisions,Contingent Liabilities and Contingent Assets,the investor shall disclose the contingent liabilities of its associates.

Derivative instruments are instruments that: