Mamagau Limited acquired 50% of the voting shares of Mashego Limited at 30 April 2015 at R160 000. The balance sheet of Mashego Limited showed the following balances at 30 April 2015: Non-current assets R450 000 Current assets R120 000 Non-current liabilities R240 000 Current liabilities R25 000 The year-end date for Mamagau Limited is on 30 April of every year. During the year ended 30 April 2016 Mashego Limited reported an after tax profit of R120 000. The directors of Mashego Limited declared an ordinary dividend of R20 000 but not yet paid at reporting date. Mamagau Limited applies equity accounting method for its associates and joint ventures. What is the correct journal to record the dividend declared as at 30 April 2016in the books of Mamagau Limited? Select one: a. Dr Investment in Mashego Limited R20 000 Cr Bank R20 000 b. Dr Dividend receivable R20 000 Cr Investment in Mashego Limited R20 000 c. Dr Dividend receivable R10 000 Cr Investment in Mashego Limited R10 000 d. Dr Investment in Mashego Limited R10 000 Cr Bank R10 000
Q13
Mamagau Limited acquired 50% of the voting shares of Mashego Limited at 30 April 2015 at R160 000. The
Non-current assets R450 000
Current assets R120 000
Non-current liabilities R240 000
Current liabilities R25 000
The year-end date for Mamagau Limited is on 30 April of every year. During the year ended 30 April 2016 Mashego Limited reported an after tax profit of R120 000. The directors of Mashego Limited declared an ordinary dividend of R20 000 but not yet paid at reporting date. Mamagau Limited applies equity accounting method for its associates and joint ventures.
What is the correct journal to record the dividend declared as at 30 April 2016in the books of Mamagau Limited?
Cr Bank R20 000
Cr Investment in Mashego Limited R20 000
Cr Investment in Mashego Limited R10 000
Cr Bank R10 000
Lets understand the basics.
When one entity hold shares of another entity in range of 20%-50% then another entity is called an associate entity.
Share of the net income and dividend needs to record in the books of account through investment in associate company account. It is called equity method of accounting for the recording associates.
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