Module 31 - Consolidation: Associates and JVs

Question 1

Equity accounting step 1

Answer 1

Adjust for any gain from a bargain purchase
CY:
DR Investment in associate/ JV
CR SPL - shares of profit of associate/ JV

PY
DR Investment in associate/ JV
CR Retained earnings

Question 2

Equity accounting step 2

Answer 2

Allocate share of historical profit/ loss and other gains/ losses to the group

Question 3

Equity accounting step 3

Answer 3

Allocate share of current year profit/ loss and other gains/ losses to the group

Question 4

Equity accounting step 4

Answer 4

Eliminate group share of intercompany transactions and balances

Question 5

Dividends

Answer 5

Are eliminated

Question 6

Intercompany unrealised profit > Group sells to JV double entry

Answer 6

DR SPL - Cost

CR Investment

Question 7

Intercompany unrealised profit > JV sells to group double entry

Answer 7

DR SPL - share of profit

CR Inventory

Question 8

Step 2 journal

Answer 8

DR Investment in associate/ JV
CR Retained earnings
(CR Other reserves if there is OCI)

Question 9

Step 3 journal

Answer 9

DR Investment in associate/ JV
CR SPL - share of profit of associate/ JV
(CR Other reserves if there is OCI)

Question 10

Dividends double entry

Answer 10

DR SPL - finance income

CR Investment in associate/ JV

Question 11

Voting power of > 20% gives

Answer 11

Significant influence