Question 1

On acquisition of the investment in associate, any excess of the investor's share of the net fair value of the associate's identifiable assets and liabilities over the cost of the investment is accounted for as....

Accepted Answer

The answer of On acquisition of the investment in associate,...

Question 2

After an investor has reduced its investment in an associate to zero following losses made by the associate, any additional losses incurred by the associate:

Accepted Answer

The answer of After an investor has reduced its investment...

Question 3

Which of the following statements is not in accordance with AASB 121 "Investments in Associates"?

Accepted Answer

All of the statements are in accordance with AASB 121 "Investments in Associates".

Question 4

On acquisition of the investment in associate, any excess between the cost of the investment and the investor's share of the net fair value of the associate's identifiable assets and liabilities is accounted for as:

Accepted Answer

The answer of On acquisition of the investment in associate,...

Question 5

Investor Ltd owns 30% of Investee Ltd. During the year, Investee Ltd had reported a net profit of $500,000 and paid dividends of $50,000. The bookkeeper of Investor Ltd mistakenly used the cost method to account for investments in Investee Ltd. Ignoring tax effect, what is the net effect of this error in the statement of financial position and statement of comprehensive income, respectively?

Accepted Answer

Using the cost method, Investor Ltd would only recognize dividends received as income, and not its share of Investee Ltd's net profit. Therefore, the error would result in an understatement of the investment by $135,000 in the statement of financial position and an understatement of income by the same amount in the statement of comprehensive income.

Question 6

Which of the following statements is not in accordance with AASB 121 "Investments in Associates"?

Accepted Answer

The answer of Which of the following statements is not...

Question 7

Investor Ltd owns 30% of Investee Ltd. During the year, Investee Ltd had reported a net profit of $100000 and paid no dividends for the year. Which of the following statements best describes the impact of the investment in Investee Ltd to Investor Ltd's financial ratios?

Accepted Answer

Since Investor Ltd owns 30% of Investee Ltd, it will only recognize 30% of Investee Ltd's net profit as its own. Therefore, the increase in net profit will lead to an improvement in earnings per share of Investor Ltd. The other financial ratios are not directly impacted by the investment in Investee Ltd.

Quiz 33: Accounting for Equity Investments

On acquisition of the investment in associate, any excess of the investor's share of the net fair value of the associate's identifiable assets and liabilities over the cost of the investment is accounted for as....

After an investor has reduced its investment in an associate to zero following losses made by the associate, any additional losses incurred by the associate:

Which of the following statements is not in accordance with AASB 121 "Investments in Associates"?

On acquisition of the investment in associate, any excess between the cost of the investment and the investor's share of the net fair value of the associate's identifiable assets and liabilities is accounted for as:

Which of the following statements is not in accordance with AASB 121 "Investments in Associates"?

Investor Ltd owns 30% of Investee Ltd. During the year, Investee Ltd had reported a net profit of $100000 and paid no dividends for the year. Which of the following statements best describes the impact of the investment in Investee Ltd to Investor Ltd's financial ratios?