If an Entity Had Previously Held an Investment in Another

question 19

Essay

If an entity had previously held an investment in another entity and by a further investment that investee became an associate or joint venture of the entity, what must be recorded at the date of the second investment?

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Definitions:

Cost Center

A function or department within an organization that does not directly add to profit but still incurs costs, such as HR or customer service departments.

Controllable Margin

A measure of profitability that focuses on the income and expenses directly controlled by a manager or business unit, excluding fixed costs.

Fixed Costs

Expenses that do not change with the level of production or sales activities over a relevant period.

Contribution Margin

The difference between sales revenue and variable costs, indicating the amount contributed towards covering fixed costs and generating profit.