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Alpha Ltd acquired 25% interest in Beta Ltd for $80,000. Profit after tax for Beta Ltd after the first year is

$60,000. Beta Ltd paid a dividend in the first year of $20,000. Alpha Ltd is NOT a parent.

Prepare journal entries that would be required in the accounting records of Alpha Ltd for

a) initial recording of the investment

b) after the first year since the investment in Beta Ltd

** I want to be able to do this using the equity method, I thought I knew how to do it, but i'm not entirely sure.

I know as it's not a parent, we don't prepare consolidated financial statements.

Top Answer

Under equity method there is no consolidation and elimination process. Instead, the investor will report its proportionate... View the full answer

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