On 1 November 20X6,a parent entity,Helios Ltd,acquired 25% (500 000 shares) of the share capital of Havers Ltd and the power to significantly influence the operating and financial policies of that company for $4 000 000 cash.In the period from the date of acquisition to 30 June 20X7,Havers Ltd earned a profit for the period of $500 000 (after tax of $200 000) and declared a dividend of $100 000.At 30 June 20X7,Helios Ltd recognised its equity in the dividend.At 30 June 20X7,the quoted market value of the shares in Havers was $10 per share.At 30 June 20X7,in the separate balance sheet of Helios Ltd and in the consolidated balance sheet of the group controlled by Helios Ltd,the investment in Havers Ltd would be reported as:

A) $4 000 000 and $4 100 000 respectively.
B) $5 000 000 and $4 100 000 respectively.
C) $5 000 000 and $5 100 000 respectively.
D) none of the above.

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Heather Robertson · Accepted Answer

Final Answer : A, Explanation :  In the separate balance sheet of Helios Ltd, the investment in Havers Ltd would be reported at the cost of acquisition, which is $4,000,000. In the consolidated balance sheet, the investment would be adjusted to include Helios Ltd's share of Havers Ltd's profit and dividends received. Helios Ltd's share of Havers Ltd's profit is 25% of $500,000, which is $125,000. The dividend received of $100,000 would not adjust the carrying amount of the investment in the consolidated balance sheet, as dividends are considered a return on the investment. Therefore, the investment in Havers Ltd would be reported as $4,000,000 + $125,000 = $4,125,000 in the consolidated balance sheet. However, since none of the provided options exactly matches this calculation, the closest correct option based on the provided information is A) $4,000,000 and $4,100,000 respectively, acknowledging a slight discrepancy in the calculation for the consolidated balance sheet figure.

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