Question
At the end of 2024, TechNova Ltd, with one subsidiary, had a holding representing 22% of the equity of Green Ltd, a manufacturing company. It
At the end of 2024, TechNova Ltd, with one subsidiary, had a holding representing 22% of the equity of Green Ltd, a manufacturing company. It had cost $95,000 when purchased at the start of 2023. At the time of that investment, Green Ltd had net assets of $800,000 which increased to $1,200,000 by the end of that year. At the start of the current year, the investment was increased by a further 10% of the equity at a cost of $140,000.
(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 TechNova Ltd's financial ratios if Green Ltd's net assets decrease by 10% by the end of the year.
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