QUESTION 6

1. On 1 July 2016 A Ltd acquired a 25% share of B Ltd. At that date, the following assets had carrying amounts different to their fair values in B Ltd's accounts:

   Asset	Carrying amount	Fair value
   Inventory	$24,000	$30,000
   Machinery	$48,000	$60,000

   All inventory was sold to third parties by 30 June 2017. On 1 July 2016, the machinery had a remaining useful life of 4 years.

   The tax rate is 30%.

   The adjustment required to the investment in associate account at 30 June 2017 in relation to the above assets is:

   		$1,575.
   		$1,800.
   		$6,300.
   		$12,600.

QUESTION 7

1. Lady Ltd owns 25% of Gaga Ltd. Gagas profit after tax for the year ended 30 June 2017 is $50,000. The tax rate is 30%. During the year ended 30 June 2017, Lady sold $10,000 worth of inventory to Gaga. These items had previously cost Lady $7,000. All the items remain unsold by Gaga at 30 June 2017. Ladys share of Gagas profit for the year ended 30 June 2017 is:

   		$11,975.
   		$11,750.
   		$8,225.
   		$9,275.

QUESTION 8

1. Where an investor sells inventory to an associate and the inventory is still on hand at the end of the year, the investors share of the associates profit is:

   		not affected as unrealised profits are only considered to arise in a parent-subsidiary relationship.
   		decreased by the investors share of the unrealised profit.
   		not affected as the unrealised profit is in the books of the investor, not the associate.
   		increased by the investors share of the unrealised profit.

QUESTION 9

1. Where an investor sells inventory to an associate in a prior year and the inventory is sold by the associate during the current year, the investment in associate account is:

   		not adjusted as the profit has been realised.
   		decreased by the investors share of the realised profit.
   		increased by the full amount of the realised profit.
   		increased by the investors share of the realised profit.

QUESTION 10

1. Where an investor has discontinued the use of the equity method because the associate has incurred losses, it must disclose the:

   		Unrecognised share of current period and cumulative losses of the associate.
   		Effect on the statement of changes in equity if it had continued to use the method.
   		Accounting policy it has adopted in place of the equity method.
   		Reason why it has discontinued the method.