On January 1, 2013, Conji Ltd During 2013, Porter Ltd

question 14

Multiple Choice

On January 1, 2013, Conji Ltd. acquired 25% of the shares of Porter Ltd. for $42,500. At this date, all the identifiable assets and liabilities of Porter Ltd. were recorded at amounts equal to fair value, and the equity of Porter Ltd. consisted of: $$\begin{array} { l c } \text { Share capital } & \$ 100,000 \\\text { Asset revaluation reserve } & 20,000 \\\text { Retained earnings } & 50,000\end{array}$$ During 2013, Porter Ltd. reported a profit of $25,000. The asset revaluation reserve increased by $5,000, this being reported in other comprehensive income. Porter Ltd. paid a $4,000 dividend. At January 1 2013, Conji Ltd. recorded the investment in Porter Ltd. at $42,500
The share of profit or loss of associate that Conji Ltd. should record is

• A)$4,000
• B)$6,250
• C)$20,000
• D)$25,000

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Definitions:

Unlimited Liability

A legal obligation in business where owners are personally responsible for all debts incurred by the business.

Misappropriation

The unauthorized, improper, or unlawful use of funds or assets for purposes other than those for which they were intended.

Negligent Act

Conduct falling below the standard of care expected to protect others against unreasonable risk of harm.

Limited Partner

A type of investor in a partnership who has limited liability to the extent of their investment and typically does not participate in daily business management.