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A Ltd. invests ₹1,00,000 for 25% of B Ltd. (associate). In year 1, B earns ₹10,000 profit, ₹2,000 OCI and pays ₹4,000 dividend. Under equity method, the carrying amount of A's investment at year-end is:
A₹1,01,500
B₹1,02,500
C₹1,02,000
D₹1,03,000
Answer & Solution
Correct answer: C. ₹1,02,000
Start ₹1,00,000 + 25% of profit ₹2,500 + 25% of OCI ₹500 − 25% of dividend ₹1,000 = ₹1,02,000. Note that dividend reduces the carrying amount, P&L share and OCI share increase it.
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