Bones Ltd acquired 8 100 ordinary shares for R15 400 in Dunn Ltd, a company in the motor industry on 1 July 2006 when the retained earnings of Dunn Ltd were R8 000 and 18 000 ordinary shares worth R36 000. Bones Ltd exercises significant influence over the management of financial policies of Sound Ltd. How much of the associate's equity is attributable to Bones Ltd, the investor?
Select one:
O a. R19 800
O b. R15 400
O c. R36 000
O d. R44 000
The answer is b. R15 400.
To calculate the attributable equity, we need to find the proportion of the associate's equity that Bones Ltd owns. We can do this by dividing the number of shares owned by Bones Ltd by the total number of shares outstanding.
Bones Ltd owns 8,100 shares, and the total number of shares outstanding is 18,000. Therefore, Bones Ltd owns 8,100/18,000 = 0.45 (45%) of the associate's equity.
To find the attributable equity, we multiply the proportion owned by the total equity of the associate. The total equity of the associate is the retained earnings plus the share capital, which is R8,000 + R36,000 = R44,000.
So, the attributable equity is 0.45 * R44,000 = R19,800.
Therefore, R19,800 of the associate's equity is attributable to Bones Ltd.