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In31/12/2012 a parent acquired60% of the net equity of a subsidiary and paid for in cash945 thousand $. In2013 Subsidiary achieved a profit of $600 thousand and150 thousand of them were distributed. The investment balance in Parent Financial Position as of31/12/2013 (in thousands) according to the equity method? a)945 b)1305 c)1215 d)1395
The Capital +( the net profit of the new year - the dividends distrbuted)*0.6=
945+(600-150)*0.6=1215
1215, (945+60% of600-60%of150
Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the profit or loss of the investee is recognised in the investor’s profit or loss. Distributions received from an investee reduce the carrying amount of the investment.
none of the answers is correct. the investment balance will be1,155 K
