On 1 July 2012 Girls Ltd acquired 25% of the shares of Spice Ltd for $200 000. At that date the equity of Spice Ltd was $800 000, with all identifiable assets and liabilities being measured at fair value. Profits/(losses) made since the date of acquisition are as follows. $$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Year ended } \
30 \text { June }
\end{array} & \text { Profit/(Loss) } \
&\$\
\hline 2013 & 40000 \
\hline 2014 & ( 400000 ) \
\hline 2015 & ( 500000 ) \
\hline 2016 & 32000 \
\hline 2017 & 40000 \
\hline
\end{array}$$ There have been no dividends paid or movements in reserves since the date of acquisition.
At 30 June 2014 the equity accounted balance of the investment in Spice was:

Question

On 1 July 2012 Girls Ltd acquired 25% of the shares of Spice Ltd for $200 000. At that date the equity of Spice Ltd was $800 000, with all identifiable assets and liabilities being measured at fair value. Profits/(losses) made since the date of acquisition are as follows. $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Year ended } \
30 \text { June }
\end{array} & \text { Profit/(Loss) } \
&\$\
\hline 2013 & 40000 \
\hline 2014 & ( 400000 ) \
\hline 2015 & ( 500000 ) \
\hline 2016 & 32000 \
\hline 2017 & 40000 \
\hline
\end{array}$$ There have been no dividends paid or movements in reserves since the date of acquisition.
At 30 June 2014 the equity accounted balance of the investment in Spice was:

Quizplus · Accepted Answer

The equity accounted balance of the investment in Spice at 30 June 2014 is $110,000. This is calculated as follows:Initial investment: $200,000Share of profits/(losses):2013: 25% x $40,000 = $10,0002014: 25% x ($400,000) = ($100,000)Total share of profits/(losses): ($90,000)Equity accounted balance at 30 June 2014: $200,000 + ($90,000) = $110,000

On 1 July 2012 Girls Ltd Acquired 25% of the Shares