Homework Answers
a) 01.01.2020 Investment in senator Ltd a/c Dr. $2940000
To Bank a/c Cr. $2940000
31.05.20 Bank a/c Dr $30000*
To dividend a/c Cr. $30000
* = 120000shares*0.25 per share.
31.12.2020 Profit & loss a/c Dr $330000*
Investment in senator Ltd a/c Cr, $330000
* ($24.5-$ 21.75) 120000shares
b) Since, Investment represents significant influce, therefore Equity method is applied to record given transactions as investment in associate thereby addiing and subtracting share in all income and expense of associate to investment account.
01.01.2020 Investment in associate a/c Dr. $2940000
To Bank a/c Cr. $2940000
31.05.20 Bank a/c Dr. $30000
To investmen in associatet a/c Cr. $30000
31.12.2020 Investment in associate a/c Dr. $72000*
To share in profit from associate a/c Cr $72000
*72000= $360000*20%share in associate.
Amortisation of equiment a/c Dr. $1600 #
To investmen in associatet a/c Cr. $1600
# = $88,000/11* 20%share in associate.
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