FAC 3704
GROUP FINANCIAL REPORTING
LEARNING UNIT 4: ACCOUNTING FOR INVESTMENTS IN
ASSOCIATES
4.1 ANALYSIS OF ASSOCIATE’S EQUITY
At acquisition: Total 100% Investor – At Investor – Since Carrying amount
01/01/01 45% 45% of investment
Share Capital 36 000
Retained Earnings 8 000
Net Equity 44 000 19 800
Gain from a bargain 4 400
purchase
Cost of Investment 15 400 15 400
Since Acquisition –
beginning of current
year
Retained (22 500) (10 125)
Earnings/Accumulated
Loss (-14 500 – 8 000)
Gain from bargain
purchase 4 400
21 500 (5 725) (5 725)
Current Year
Profit for the year (32 29 400 13 230 13 230
00 – 8 100 income tax
expense + 5 500 gain
on expropriation of
land + / - Other items
affecting associate’s
profit)
Unrealised profit in (684) (308)
inventory (5 700 X
20/120 X 72%)
Ordinary Dividends (12 000) (5 400) (5 400)
paid “Other Income”
38 216 1 797 17 505
GROUP FINANCIAL REPORTING
LEARNING UNIT 4: ACCOUNTING FOR INVESTMENTS IN
ASSOCIATES
4.1 ANALYSIS OF ASSOCIATE’S EQUITY
At acquisition: Total 100% Investor – At Investor – Since Carrying amount
01/01/01 45% 45% of investment
Share Capital 36 000
Retained Earnings 8 000
Net Equity 44 000 19 800
Gain from a bargain 4 400
purchase
Cost of Investment 15 400 15 400
Since Acquisition –
beginning of current
year
Retained (22 500) (10 125)
Earnings/Accumulated
Loss (-14 500 – 8 000)
Gain from bargain
purchase 4 400
21 500 (5 725) (5 725)
Current Year
Profit for the year (32 29 400 13 230 13 230
00 – 8 100 income tax
expense + 5 500 gain
on expropriation of
land + / - Other items
affecting associate’s
profit)
Unrealised profit in (684) (308)
inventory (5 700 X
20/120 X 72%)
Ordinary Dividends (12 000) (5 400) (5 400)
paid “Other Income”
38 216 1 797 17 505
