Question
At the end of 2023, TechSolutions Ltd, with one subsidiary, had a holding representing 20% of the equity of Bright Ltd, an advanced lighting technology
At the end of 2023, TechSolutions Ltd, with one subsidiary, had a holding representing 20% of the equity of Bright Ltd, an advanced lighting technology company. It had cost $82,000 when purchased at the start of 2022. At the time of that investment, Bright Ltd had net assets of $700,000 which increased to $1,000,000 by the end of that year. At the start of the current year, the investment was increased by a further 15% of the equity at a cost of $130,000.
(a) How would the investment be shown in the financial statements if it were treated as a trade investment? (b) How would the investment be shown in the financial statements if it were treated as an associated undertaking? (c) Analyze the potential risks to TechSolutions Ltd's investment if Bright Ltd faces increased competition.
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