Topic11_PracticeQuestions - Solutions for Practice...

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Solutions for Practice Questions Lecture Topic 11 Week 6 27 Jan (DM) Lecture Topic 11 Accounting for Associates: The Equity Method Identify associates and explain the difference between an associate and other investments Prepare journal entries to account for interests in associates Post equity accounting adjustments to determine relevant balances in the financial statements of the investor Practice Questions: Picker et al, Chapter 28 Exercise 28.1 Exercise 28.3
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Exercise 28.1 Adjustments where investor prepares and does not prepare consolidated financial statements SARAH LTD – MADISON LTD 30% Sarah Ltd Madison Ltd At 1 July 2008: Net fair value of identifiable assets and liabilities of Madison Ltd = $150 000 Net fair value acquired = 30% x $150 000 = $45 000 Cost of investment = $50 000 Goodwill = $5 000 1. Journal Entries in the Accounts of Sarah Ltd 1 July 2008 Investment in Madison Ltd Dr 50 000 Cash/Payable Cr 50 000 (Acquisition of shares in Madison Ltd) 2008 – 2009
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Topic11_PracticeQuestions - Solutions for Practice...

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