JoJo Ltd Provided an Advance of $500 000 to Its

question 22

Multiple Choice

JoJo Ltd provided an advance of $500 000 to its subsidiary BoBo Ltd. Interest of $50 000 was charged during the year ended 30 June 2018. On consolidation, the following adjustment is needed at 30 June 2018 in relation to the interest charged:

• A) no adjustment needed.
• B) Dr Interest revenue $50 000 Cr Interest expense $50 000
• C) Dr Interest expense $50 000 Cr Interest revenue $50 000
• D) Dr Retained earnings $50 000 Cr Cash $50 000

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Definitions:

Stock Investments

Purchasing and holding shares of stock in a company with the expectation of earning a return in the form of dividends, capital gains, or both.

Common Stock

A type of security that represents ownership in a corporation, granting shareholders voting rights and a share in the company’s profits through dividends.

Equity Method Investment

An accounting technique used by firms to assess the profits earned through their investments in other companies by reporting these profits in proportion to their ownership stake.

Long-Term Investments-AFS

Available-for-Sale Long-term Investments are financial assets not classified as trading or held-to-maturity investments, valued at fair market prices with gains or losses reported in other comprehensive income.