Exam 31: Associates and Joint Ventures

On 1 July 20X3 Alpha Ltd acquired a 25% share of Beta Ltd. At that date the following assets had carrying amounts different to their fair values in Beta's books: All inventories were sold to third parties by 30 June 20X4. On 1 July 20X3, the machinery had a remaining useful life of 3 years. The tax rate is 30%. The adjustment required to the Investment in Associate account at 30 June 20X4 in relation to the above assets is:

Investments in associates accounted for using the equity method are presented in the statement of financial position amongst:

Nero Ltd purchased a 30% shareholding in Bianco Ltd on 1 January 20X8 for $180 000. Bianco Ltd's assets were recorded at fair values and its owners' equity, totalling $520 000, was represented as follows: Assuming that Nero Ltd applies the equity method in its own books, the entry to record the dividend receivable from Bianco Ltd at 31 December 20X9 would include:

Where an investor sells inventories to an associate in a prior year and the inventories are sold by the associate during the current year the investment in associate account is:

Nero Ltd purchased a 30% shareholding in Bianco Ltd on 1 January 20X8 for $180 000. Bianco Ltd's assets were recorded at fair values and its owners' equity, totalling $520 000, was represented as follows: The equity carrying amount of the investment in Bianco Ltd at 31 December 20X8 is:

On 1 July 20X4 Joey Ltd acquired 25% of the shares of Leo Ltd for $100 000. At that date the equity of Leo Ltd was $400 000, with all identifiable assets and liabilities being measured at fair value. Profits/(losses) made since the date of acquisition are as follows: There have been no dividends paid or movements in reserves since the date of acquisition. At 30 June 20X9 the equity accounted balance of the investment in Leo was:

For the purposes of equity accounting, significant influence is regarded as the power of an investor to:

Where there are transactions between the investor and associate that result in an unrealised profit, the investor's share of the associate's profit is:

Adjustments made for the purpose of calculating the incremental adjustment to the share of profit of an associate are:

On 1 July 20X8 Berardo Ltd acquired 25% of the ordinary issued share capital of Ricky Ltd for $375 000. This investment gave rise to significant influence. The share capital and reserves of Ricky Ltd at 1 July 20X8 were: All the identifiable net assets of Ricky Ltd were stated at fair value at the date of acquisition except for a building whose carrying value was $50 000 less than the fair value. Goodwill arising on Berardo's acquisition of Ricky was:

Clovelly Ltd owns 25% of Bronte Ltd. Bronte's profit after tax for the year ended 30 June 20X5 is $30 000. The tax rate is 30%. On 1 July 20X3, Bronte Ltd sold an item of plant to Clovelly Ltd for $8000. The carrying amount of the asset on this date in Bronte Ltd's records was $3000. The plant had a remaining useful life of 5 years. Clovelly's share of Bronte's profit for the year ended 30 June 20X5 is:

Where an investor has discontinued the use of the equity method because the associate has incurred losses it must disclose the:

Where an acquisition in an associate results in an excess the excess is accounted for in the year of acquisition as follows:

Which of the following statements is correct?

Investor Limited acquired a 30% interest in Investee Limited for $27 000. Investor holds other equity investments but does not prepare consolidated financial statements. Investee Limited revalued its buildings class of assets by $10 000 during the current financial period. The balance of the Investment in Associate account at the end of the current financial period is:

On 1 July 20X4 Joey Ltd acquired 25% of the shares of Leo Ltd for $100 000. At that date the equity of Leo Ltd was $400 000, with all identifiable assets and liabilities being measured at fair value. Profits/(losses) made since the date of acquisition are as follows: There have been no dividends paid or movements in reserves since the date of acquisition. At 30 June 20X8 the equity accounted balance of the investment in Leo was:

On 1 July 20X4 Joey Ltd acquired 25% of the shares of Leo Ltd for $100 000. At that date the equity of Leo Ltd was $400 000, with all identifiable assets and liabilities being measured at fair value. Profits/(losses) made since the date of acquisition are as follows: There have been no dividends paid or movements in reserves since the date of acquisition. At 30 June 20X6 the equity accounted balance of the investment in Leo was:

When disclosing information about investments in associates, AASB 12/IFRS 12 Disclosure of Interests in Other Entitites, requires separate disclosure of which of the following? I - Carrying amounts of investments in associates, in the statement of financial position. II - Share of profit or loss of associates, in the statement of profit or loss and other comprehensive income. III - Shares of changes recognised directly in the associate's equity, in the statement of changes in equity. IV - Unrecognised share of losses in associates, in the Notes to the accounts.

The equity method of accounting for an investment in an associate includes the following steps:

When goodwill is acquired by an investor in an associate, the amortisation of goodwill is: