Question

Grape Corporation purchases a 25% interest in Orange Corporation on January 2, 2018, for $800. At...

Grape Corporation purchases a 25% interest in Orange Corporation on January 2, 2018, for $800. At that time, the carrying amount of Orange’s net assets was $2,950. Any excess of the cost of the investment over Grape’s share of Orange’s carrying amount can be attributed to unrecorded intangibles with a useful life of 20 years. Orange declared and paid a dividend of $17 on October 20, 2018 and reported net income of $50 for its year ended December 31, 2018.

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1. Prepare Grape’s 2018 entries to record all transactions and events related to the investment in its associate. Assume Grape is a publicly accountable enterprise that applies IFRS.

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Answer #1
Journal Entry in the Books of Grape's
Date Detail Debit Credit
02-Jan Investment in Orange Corporation $737.50
Intangible Asset $62.50
Cash $800.00
( Being 25% investment made in Orange Corporation)
20-Oct Bank $4.25
Dividend Income $4.25
Being Dividedn recived on investment in Orange Corporation, $17*25%
31-Dec Investment in Orange Corporation $12.50
Shar of Profit of Associates $12.50
Being Investment value increase by adjusting share of income in Orange Co. ( $50*25%)
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