Assume Timpet Ltd. acquired 10% of the shares of Dawson Ltd on January 1, 2012 for $13,000. At December 31, 2012, the end of the entity's reporting period, the fair value of the investment was $16,200. The investment was designated as fair value through profit and loss based on IFRS 9. On July 1 2013, Timpet Ltd. acquired a further 10% of the share capital of Dawson Ltd. for $17,200 (this also being the fair value of the initial investment in Dawson Ltd. at this date), when the equity of Dawson Ltd. consisted of:$$\begin{array} { l r }
\text { Share capital } & \$ 100,000 \
\text { Asset revaluation reserve } & 12,000 \
\text { Retained earnings } ( 1 / 1 / 13 ) & 38,000 \
\text { Profit } ( 1 / 1 / 13 \text { to } 30 / 6 / 13 ) & 8,000
\end{array}$$
The identifiable assets and liabilities of Dawson Ltd were recorded at fair value at this date except for inventory, whose fair value was $15,000 greater than carrying amount. This acquisition gives Timpet Ltd. significant influence over Dawson Ltd.
On January 1, 2012, which of the following statements is TRUE?

Question

Assume Timpet Ltd. acquired 10% of the shares of Dawson Ltd on January 1, 2012 for $13,000. At December 31, 2012, the end of the entity's reporting period, the fair value of the investment was $16,200. The investment was designated as fair value through profit and loss based on IFRS 9. On July 1 2013, Timpet Ltd. acquired a further 10% of the share capital of Dawson Ltd. for $17,200 (this also being the fair value of the initial investment in Dawson Ltd. at this date), when the equity of Dawson Ltd. consisted of:$$\begin{array} { l r } 
\text { Share capital } & \$ 100,000 \
\text { Asset revaluation reserve } & 12,000 \
\text { Retained earnings } ( 1 / 1 / 13 ) & 38,000 \
\text { Profit } ( 1 / 1 / 13 \text { to } 30 / 6 / 13 ) & 8,000
\end{array}$$
The identifiable assets and liabilities of Dawson Ltd were recorded at fair value at this date except for inventory, whose fair value was $15,000 greater than carrying amount. This acquisition gives Timpet Ltd. significant influence over Dawson Ltd.
On January 1, 2012, which of the following statements is TRUE?

Quizplus · Accepted Answer

On January 1, 2012, Timpet Ltd. would initially record its investment in Dawson Ltd. at the cost of $13,000, as it is the acquisition date and the investment is designated as fair value through profit and loss.

Assume Timpet Ltd The Identifiable Assets and Liabilities of Dawson Ltd Were Recorded