Question
At the end of 2023, TechWave Inc, with one subsidiary, had a holding representing 20% of the equity of Sun Ltd, a renewable energy solutions
At the end of 2023, TechWave Inc, with one subsidiary, had a holding representing 20% of the equity of Sun Ltd, a renewable energy solutions company. It had cost $82,000 when purchased at the start of 2022. At the time of that investment, Sun Ltd had net assets of $700,000 which increased to $950,000 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 $120,000.
(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) Assess the impact on TechWave Inc's earnings per share (EPS) if Sun Ltd achieves significant growth.
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