Questions $1$ & $2$ are financial reporting assessment opportunities $($AOs$).$ Please provide a

resolution to each AO and ensure that the resolution is well supported by appropriate

standard references. Question $2(7$ marks$)$

December $31,20$x$4$ Levers Inc. purchased $3,000$ shares of Control Inc., which represented $30\%$ of the

outstanding common shares, for $$180,000.$ At the time, the investment in Control Inc. was recorded as

an investment in associates and the equity method was used to account for the investment for $20$x$4.$

Levers Inc. follows IFRS and had correctly recorded all entries for $20$x$4.$

During $20$x$4,$ Control Inc. had net income of $$150,000$ and declared and paid dividends of $$60,000.$

April $30,20$x$5$ Levers Inc. sold $2,000$ of its shares in Control Inc. for $$140,000.$ The recorded a journal

entry of Dr Cash and Cr Investment in Associates for the amount.

It is early $20$x$6$ and you are helping the CFO of Levers Inc. finalize their financial statements for the

year ended December $31,20$x$5.$ You see that the $$Investment in Associates$$ account is still on the books

for $$80,000.$ The CFO states that she has continued to use the equity method to account for their

investment in Control Inc., but $$just changed our share of ownership to $10\%$ as that is what we now

own. Control Inc. had net income of $$180,000$ last year and paid out dividends of $$50,000.$ Did I not do

it correctly?$$