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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
