On January 1, 2011, Cynna purchased 40% of the shares of Eckers for $63,200. At that date, equity of Eckers consisted of:
Share capital ...... $125,000
Retained earnings .... 11,000
At January 1, 2011, the identifiable assets and liabilities of Eckers were recorded at fair value. Information about income and changes in equity for both companies for the year ended December 31, 2013, was as shown:

Additional information:
1. Cynna recognized dividend revenue from Eckers before receipt of cash. Eckers declared a $5,000 dividend in December 2013, this being paid in February 2014.
2. On June 30, 2011, Eckers sold Cynna a motor vehicle for $12,000. The vehicle had originally cost Eckers $18,000 and was written down to $9,000 for both tax and accounting purposes at time of sale to Cynna. Both companies depreciated motor vehicles straight line over five years.
3. The beginning inventory of Eckers included goods at $4,000 bought from Cynna; their cost to Cynna was $3,200.
4. The ending inventory of Cynna included goods purchased from Eckers at a profit before tax of $1,600.
5. The tax rate is 30%.
Required
(a) Prepare the journal adjustments in the books of Cynna to account for the investment in Eckers in accordance with IAS 28 for the year ended December 31, 2013, assuming Cynna does not prepare consolidated financial statements.
(b) Calculate the balance in the investment in Eckers at December 31, 2013, under IAS 28.
(c) Calculate the balance in the investment in Eckers at December 31, 2013, under ASPE.

Transcribed Image Text:

Cynna $26,000 10,600 15,400 18,000 33,400 5,000 10,000 15,000 $18,400 Eckers $23,500 5,400 18,100 16,000 34,100 4,000 5,000 9,000 $25,100 Income before tax Income tax expense Net income Retained earnings (1/1/13) Dividend paid Dividend declared Retained earnings (31/12/13)