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Isotope Limited acquired a 20% share in Atomic Limited for $20,000. Isotope Limited has no other investments.

Isotope Limited acquired a 20% share in Atomic Limited for $20,000. Isotope Limited has no other investments. At the date on which it became an associate, Atomic Limited had the following equity (assumed to be at fair value):

  • Share capital $50,000
  • Retained earnings $40,000

At the end of the financial year following the investment, Atomic Limited generated a profit of $6,000. After applying the equity method of accounting, Isotope Limited will have the following carrying amount for the investment:

(You may ignore tax for the purposes of this question)

Select one:

a. $24,000

b. $1,200

c. $26,000

d. $21,200

e. $18,000

f. $19,200

g. $6,000

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