On January 1 st , 2011, ABC Inc. purchased 30% of the outstanding voting shares of DEF Inc, a company whose operations rely heavily on ABC's managerial involvement, for $600,000. On that date, DEF's net assets had a fair value equivalent to their book values. During 2011 and 2012, DEF Inc. earned income and paid dividends as follows: $\begin{array}{|l|l|l|} \hline & \text { Income } & \text { Dividends } \ \hline 2011 & \$ 120,000& \$ 20,000 \ \hline 2012 & \$ 180,000& \$ 30,000 \ \hline \end{array}$ -Assuming that ABC adheres to IFRS, what would be the balance in the Investment in Associate - DEF Inc. account on December 31^st, 2011?

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Under IFRS, when a company purchases a significant influence (but not control) in another company (typically 20%-50% of voting shares), it must use the equity method to account for this investment. The initial investment is recorded at cost. Subsequently, the investor adjusts the carrying amount of the investment to recognize its share of the earnings or losses of the investee after the date of acquisition. Dividends received from the investee reduce the carrying amount of the investment. For ABC Inc., the investment in DEF Inc. would be initially recorded at $600,000. For 2011, ABC's share of DEF's income (30% of $120,000) is $36,000, and its share of dividends received (30% of $20,000) is $6,000. Therefore, the investment account would be adjusted to $630,000 ($600,000 + $36,000 - $6,000) by the end of 2011.

On January 1st, 2011, ABC Inc -Assuming That ABC Adheres to IFRS, What Would Be the Outstanding

On January 1^st, 2011, ABC Inc -Assuming That ABC Adheres to IFRS, What Would Be the Outstanding