Gunawan Limited acquired a 20% share in Juliano Limited for $18 000. Gunawan Limited has no other investments. At the date on which it became an associate, Juliano Limited had the following equity (which reflected the fair value of net assets on that date):
Share capital $50 000
Retained earnings $40 000
At the end of the financial year following the investment, Juliano Limited generated a profit of $6000. After applying the equity method of accounting, Gunawan Limited will have the following carrying amount for the investment:

Question

Quizplus · Accepted Answer

Gunawan Limited's share of Juliano Limited's profit is 20% of $6000, which is $1200. Adding this to the initial investment of $18,000 gives a carrying amount of $19,200.

Gunawan Limited Acquired a 20% Share in Juliano Limited for $18