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?

Question

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?

Answer 1

To determine the amount of the associate's equity attributable to Bones Ltd, we need to calculate the percentage of ownership that Bones Ltd has in Dunn Ltd.

First, we need to find the total number of ordinary shares in Dunn Ltd:
18,000 ordinary shares

Next, we need to find the percentage ownership of the ordinary shares acquired by Bones Ltd:
8,100 ordinary shares / 18,000 ordinary shares = 45% ownership

Now, we can calculate the equity attributable to Bones Ltd:
Total equity of Dunn Ltd * Percentage ownership of Bones Ltd
= (Retained earnings + Value of ordinary shares) * Percentage ownership of Bones Ltd
= (R8,000 + R36,000) * 45%
= R44,000 * 45%
= R19,800

Therefore, R19,800 of the associate's equity is attributable to Bones Ltd.