Dick Ltd Acquired 17% of the Issued Capital of Electronics

question 2

Multiple Choice

Dick Ltd acquired 17% of the issued capital of Electronics Ltd and significant influence over the operations of Electronics Ltd on 1 March 20X0.Dick issued 400 000 Dick Ltd shares for the acquisition.The fair value of Dick Ltd's shares at this date was $9.50 each.The total fair value of Electronics Ltd's net assets at this date was $20 million.Under the method of equity accounting in AASB 128, what is the balance of the account 'Investment in Electronics Ltd' at this date?

• A)$3 400 000
• B)$3 800 000
• C)$4 050 000
• D)$3 442 500

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Definitions:

Substitute Goods

Products or services that can be used in place of each other, where an increase in price for one leads to an increase in demand for the other.

Good Faith

A principle of honesty and sincerity of intention in one's actions, especially in contractual or negotiation contexts.

Implied Warranty of Merchantability

A legal presumption that a product will meet the reasonable expectations of quality and performance for goods of its kind.

Bicycle Merchant

A retailer specialized in the sale and service of bicycles and related accessories.