At the end of 20X5, a parent company, P plc, with one subsidiary had a holding representing

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At the end of 20X5, a parent company, P plc, with one subsidiary had a holding representing 10 per cent of the equity of R Ltd, a clothing company. It had cost £80,000 when purchased at the start of 20X4. At the time of that investment, R Ltd had net assets of £560,000 which increased to £840,000 by the end of that year. At the start of the current year, the investment was increased by a further 11 per cent of the equity at a cost of £110,000.


Required:

(a) How would the investment be shown in the financial statements if it were treated as a trade investment, i.e. as neither an associate nor as a subsidiary?

(b) How would the investment be shown in the financial statements if it were treated as an associated undertaking?

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