Ryan Ltd acquired a 20 per cent interest in Per Ltd on 1 July 2021 for a cash consideration of $366 000. Ryan Ltd has a sufficient balance of voting rights in Per Ltd to give it significant influence in its operating and financing decisions. Per Ltds assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows:

Share capital 1 000 000

Retained earnings 830 000

Total shareholders funds 1 830 000

During the year ended 30 June 2022 the following events occurred:

Per Ltd had an after-tax profit of $348 000.

Per Ltd declared and authorised a dividend of $25 000 which was paid later in the same year.

Later in the year Per Ltd declared and authorised a further $25 000 dividend out of current year profits. This dividend will not be paid until the following year.

Ryan Ltd accrues the dividends of associates as revenue when they are declared and authorised. What is the amount of the investment in Per Ltd and income that will be recorded in the books of Ryan Ltd as at 30 June 2022 under (i) the cost method and (ii) the equity method?

a.

(i) Investment in Per Ltd: $366 000; Income: $10 000 (ii) Investment in Per Ltd: $306 400; Income: $10 000

b.

(i) Investment in Per Ltd: $366 000; Income: $5 000 (ii) Investment in Per Ltd: $385 600; Income: $69 600

c.

None of the other options

d.

(i) Investment in Per Ltd: $366 000; Income: $10 000 (ii) Investment in Per Ltd: $425 600; Income: $69 600

e.

(i) Investment in Per Ltd: $361 000; Income: $10 000 (ii) Investment in Per Ltd: $425 600; Income: $69 600