Company F has an equity accounted investment (owns 20% of the shares) in Company K, purchased in 20X1, with a carrying amount of $200 000 at year end 20X4.Company K reports a total increase in owner's equity for the year ended 20X5 of $80 000.Which journal entry will Company F process in respect of this investment?

Question

Quizplus · Accepted Answer

Company F owns 20% of Company K, so it recognizes 20% of the increase in owner's equity of Company K. Therefore, the journal entry would be a debit to investment in associate and a credit to share of associate's profit or loss for $16,000 (20% of $80,000).

Company F Has an Equity Accounted Investment (Owns 20% of the Shares)