The Following Information Relates to Questions Nero Ltd Purchased a 30

question 4

Multiple Choice

The following information relates to questions Nero Ltd purchased a 30% per cent shareholding in Bianco Ltd on 1 January 20X8 for $180,000. Bianco Ltd’s assets recorded at fair values and its owners’ equity, totalling $520,000, was represented as follows: $\begin{array} { l r } \text { Share capital } & \$ 260,000 \\\text { Reserves } & \$ 120,000 \\\text { Retained profits } & \$ 100,000 \\\text { Asset revaluation reserve } & \$ 40,000\end{array}$
During July 20X8, Bianco Ltd paid an interim dividend of $18,000. At 31 December 20X8, Bianco Ltd reported: $\begin{array}{ll}\text { Profit for 20X8 } & \$ 48,000 \\\text { Final dividend payable } & \$ 14,000 \\\text { A transfer to the general reserve } & \$ 10,000 \\\text { Increase of the asset revaluation reserve to } & \$ 70,000\end{array}$
-Assuming that Nero Ltd applies the equity method in its own books the entry to record the dividend receivable from Bianco Ltd at 31 December 20X9 would include:

• A) a credit to the dividend revenue account.
• B) a credit to the investment in associate account.
• C) a debit to the dividend revenue account.
• D) a debit to the investment in associate account.

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Definitions:

Depreciation

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life, reflecting its wear and tear, obsolescence, or decline in value over time.

Cost Allocation

The process of identifying, aggregating, and assigning costs to cost objects, such as products, services, or departments.

Residual Value

Residual value is the estimated amount that an asset will be worth at the end of its useful life, reflecting its expected salvage value.