Parent Ltd acquired 36% of the equity in Associate Ltd on 1 April 2009 for $560 000.

At the date of acquisition, Associate Ltd had equity comprised of share capital of $745 000 and retained earnings of $278 000.

Parent Ltd has requested your help in using the equity method for this investment as required by NZ IAS 28 Investments in Associates. Parent Ltd provided you with the following information:

• During March 2019 Associate Ltd made sales to Parent Ltd, which resulted in an unrealised profit of $1 300.

• During March 2020 Associate Ltd made sales to Parent Ltd, which resulted in an unrealised profit of $700.

• During March 2020 Parent Ltd made sales to Associate Ltd, which resulted in an unrealised profit of $500.

• The tax rate is 28%.

• The current equity of Associate Ltd at 31 March 2020 comprised:

      

Share capital	$745 000
Retained earnings - opening	300 000
Profit after tax	420 000
Dividend declared	185 000

Required

Determine the amount at which the ‘Investment in Associate Ltd’ asset will be measured at, after being equity accounted for, in the financial statements as at 31 March 2020.

You must provide the following workings with your answer:

1. Complete a ‘quick estimate’.
2. The notional journal entry at 31 March 2020.

Answer rating: 100% (QA)

Investment in Associate Balance Investment beg 560000 Share in Increase of RE from 2003 to 2020 7... View the full answer