47 others answered this question
Question 3b iii
(b) Kappa prepares financial statements to 30 September each year. During the year ended 30 September 2016 Kappa entered into the following transactions:
(iii) On 1 October 2015, Kappa purchased an equity investment in entity Y for $12 million. The investment did not give Kappa control or significant influence over entity Y but the investment is seen as a long-term one. On 30 September 2016, the fair value of Kappa’s investment in entity Y was estimated to be $13 million. (3 marks)
Required:
Explain and show how the above transactions would be reported in the financial statements of Kappa for the year ended 30 September 2016.
Note: The mark allocation for part (b) is shown against each of the three transactions above.