Question: 1. On 1 January 2018, Wus Tea Ltd, a bubble milk tea chain, acquired a 20 per cent interest in UnluckyCoffee Ltd for $120,000 in

1. On 1 January 2018, Wus Tea Ltd, a bubble milk tea chain, acquired a 20 per cent interest in UnluckyCoffee Ltd for $120,000 in cash. As at the acquisition date, the assets of UnluckyCoffee Ltd were reported at fair value. For the year ending 31 December 2018, UnluckyCoffee Ltd recorded an after-tax loss of $20,000. Wus Tea Ltd accounts for its investment in UnluckyCoffee Ltd using the equity method of accounting. The assets of Wus Tea Ltd, inclusive of its investment in UnluckyCoffee Ltd accounted for under equity accounting was $4,000,000 as at 31 December 2018. The EBIT of Wus Tea Ltd, inclusive of its investment in UnluckyCoffee Ltd accounted for under equity accounting is $200,000 as at 31 December 2018. The fair value of UnluckyCoffee Ltd was assessed to be only $70,000 at the end of the year. What is the ROA for Wus Tea Ltd? What would their ROA be if their investment in Unlucky Coffee Ltd was accounted for as a financial instrument?

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