Homework Answers
X acquires 22%..............
Correct option is c. Long term Investment (equity method)
When Invetment is in range of 20% to 50% then it will be show as Long term Invetment (equity Method).
A, B and C Invested.............
option b. 17000 is correct
Working as under:
| A | B | C | Total | |
| Total profit | 44,000 | |||
| Salary | 10,000 | 8,000 | 7,500 | 25,500 |
| Interest on Capital @10% | 4,000 | 3,000 | 2,500 | 9,500 |
| Profit after salary & interest | 9,000 | |||
| Distributed equal (9000 / 3) | 3,000 | 3,000 | 3,000 | 9,000 |
| Total income distributed | 17,000 | 14,000 | 13,000 | |
| (Salary+Interest+Profit) |
The accounting approached..................
Correct option is c. equity method and proportianate method
In case of Joint venture two type of approached are made in accounting. One is equity method and second one is proportianate method.
Direct method is used for subsidiary not for Joint venture
On April 31, 2019...............
option c. 240,000 is correct
Working as under:
| X Book Balance | 1,200,000 |
| Share acquired | 80% |
| Minority Interest (100% - 80%) | 20% |
| Minority Interest in amount | 240,000 |
| (20% of 1,200,000) |
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