An investor company holds 45% of shares, valued at $80 000, in its associate company. It...

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An investor company holds 45% of shares, valued at $80 000, in its associate company. It...

An investor company holds 45% of shares, valued at $80 000, in its associate company. It has also given a loan of $70 000 to its associate company on 1 January 2013. The associate company has incurred losses of $100 000 for the financial year end 31 December 2013. What is the value of the investment in the associate company reported in the financial statements of the investor company for the year end 2013?
1. A) $105 000
2. B) ($45 000)
3. C) ($50 000)
4. D) $35 000

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Answer 1

Answer #1

As the company has made an investment in its associate company it shall be recorded at the equity method means value of investment adjusted with the loss/profit of the period.

In this question total investment $ 80,000 and loss incurred is $100000

Hence Value of investment will be $80000 Minus 45% of Loss $100000 = $80000 - (45% of $100000)

= $80000 - $45000

= $35000

Thus Option (D) $35 000 is correct answer.

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Answer 2

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