Parent Ltd. acquired 25% of Associate Ltd. on the 1 January 2020 for 400,000 and at...

 

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Parent Ltd. acquired 25% of Associate Ltd. on the 1 January 2020 for £400,000 and at that date the net assets were £70,000. At the year-end 31 December 2020, the net assets of Associate are £145,000. Required: 1) Calculate the Investment in Associate to be reflected in the Consolidated Statement of Financial Position. 2) Calculate the Investment in Associate to be reflected in the Consolidated Statement of Financial Position if the Associate is impaired by £90,000 on 31* December 2020. Question 5. Company Fashion Ltd. has a contract to buy 300 metres of cotton from Jumper Ltd. each month for £18 per metre. From each metre of cotton, Fashion Ltd. produces a skirt. The labour costs equal to £16 per skirt. Usually, Fashion Ltd. sells each skirt for £40 but, on 31 December 2018, the market price falls to £28. The contract between Fashion Ltd. and Jumper Ltd. has a duration of 2 months remaining at 31 December 2018. If Fashion Ltd. decides to cancel the cotton contract on 31" December 2018, it will have to pay a cancellation penalty of £2,400 for each of the next two months. Required: 1) Should Fashion Ltd. recognize a provision or a contingency? Why? 2) In case Fashion Ltd. needs to recognize a provision, what amount should be recognised with respect to the contract in its financial statements for the period ending on 31 December 2018? Parent Ltd. acquired 25% of Associate Ltd. on the 1 January 2020 for £400,000 and at that date the net assets were £70,000. At the year-end 31 December 2020, the net assets of Associate are £145,000. Required: 1) Calculate the Investment in Associate to be reflected in the Consolidated Statement of Financial Position. 2) Calculate the Investment in Associate to be reflected in the Consolidated Statement of Financial Position if the Associate is impaired by £90,000 on 31* December 2020. Question 5. Company Fashion Ltd. has a contract to buy 300 metres of cotton from Jumper Ltd. each month for £18 per metre. From each metre of cotton, Fashion Ltd. produces a skirt. The labour costs equal to £16 per skirt. Usually, Fashion Ltd. sells each skirt for £40 but, on 31 December 2018, the market price falls to £28. The contract between Fashion Ltd. and Jumper Ltd. has a duration of 2 months remaining at 31 December 2018. If Fashion Ltd. decides to cancel the cotton contract on 31" December 2018, it will have to pay a cancellation penalty of £2,400 for each of the next two months. Required: 1) Should Fashion Ltd. recognize a provision or a contingency? Why? 2) In case Fashion Ltd. needs to recognize a provision, what amount should be recognised with respect to the contract in its financial statements for the period ending on 31 December 2018?

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