ACCA FR Syllabus D. Preparation Of Financial Statements - Associates - Past Papers ^{8 / 8}

Caddy Co acquired 240,000 of Ambel Co’s 800,000 equity shares for $6 per share on 1 October 20X4.

Ambel Co’s profit after tax for the year ended 30 September 20X5 was $400,000 and it paid an equity dividend on 20 September 20X5 of $150,000.

On the assumption that Ambel Co is an associate of Caddy Co, what would be the carrying amount of the investment in Ambel Co in the consolidated statement of financial position of Caddy Co as at 30 September 20X5?

A     $1,560,000
B     $1,395,000
C     $1,515,000
D     $1,690,000

For many years, Dilemma has owned 35% of the voting shares and held a seat on the board of Myno which has given Dilemma significant influence over Myno.

The other shares (65%) in Myno were held by many other shareholders who all owned less than 10% of the share capital.

On this basis, Dilemma considered Myno to be an associate and has used equity accounting to account for its investment.

In March 2015, Agresso made an offer to buy all of the shares of Myno.

The offer was supported by the majority of Myno’s directors.

Dilemma did not accept the offer and held on to its shares in Myno.

On 1 April 2015, Agresso announced that it had acquired the other 65% of the share capital of Myno and immediately convened a board meeting at which three of the previous directors of Myno were replaced, including the seat held by Dilemma.

Required:

Explain how the investment in Myno should be treated in the consolidated statement of profit or loss of Dilemma for the year ended 30 June 2015 and the consolidated statement of financial position at 30 June 2015.

(5 marks)

Johnson paid $1·2 million for a 30% investment in Treem’s equity shares on 1 August 2014.

Treem’s profit after tax for the year ended 31 March 2015 was $750,000.

On 31 March 2015, Treem had $300,000 goods in its inventory which it had bought from Johnson in March 2015.

These had been sold by Johnson at a mark-up on cost of 20%.

Treem has not paid any dividends.

On the assumption that Treem is an associate of Johnson, what would be the carrying amount of the investment
in Treem in the consolidated statement of financial position of Johnson as at 31 March 2015?

A     $1,335,000
B     $1,332,000
C     $1,300,000
D     $1,410,000

The Caddy group acquired 240,000 of August’s 800,000 equity shares for $6 per share on 1 April 2014.

August’s profit after tax for the year ended 30 September 2014 was $400,000 and it paid an equity dividend on 20  September 2014 of $150,000.

On the assumption that August is an associate of Caddy, what would be the carrying amount of the investment in August in the consolidated statement of financial position of Caddy as at 30 September 2014?

A     $1,455,000
B     $1,500,000
C     $1,515,000
D     $1,395,000