Billy Ltd owns 19% of Guyatts Ltd and has significant influence over the operations of Guyatts Ltd.For the year ended 31 December 20X1, Guyatts Ltd reported a profit of $900 000 and paid a total cash dividend of $100 000.What is the difference between the total revenue reported by Billy Ltd under the equity method in AASB 128 versus that revenue which would be reported under the cost method? The AASB 128 net revenue would be higher by:
A)$33 000
B)$133 000
C)$152 000
D)$190 000

Question

Quizplus · Accepted Answer

Under the equity method in AASB 128, Billy Ltd would record its share of Guyatts Ltd's reported profit as revenue, which would be 19% of $900,000 = $171,000. In addition, Billy Ltd would also record its share of the cash dividend received as revenue, which would be 19% of $100,000 = $19,000. Therefore, total revenue recorded by Billy Ltd under the equity method would be $171,000 + $19,000 = $190,000.

Under the cost method, Billy Ltd would only recognize dividends received as revenue, which would be 19% of $100,000 = $19,000. Therefore, the difference between the revenue reported under the equity method and the cost method would be $190,000 - $19,000 = $171,000.

Thus, the net revenue reported by Billy Ltd under the equity method in AASB 128 would be higher by $152,000 ($171,000 - $19,000). Therefore, the best choice is C.

Billy Ltd Owns 19% of Guyatts Ltd and Has Significant