Jason Ltd holds a 25% interest in the voting shares of Bourne Ltd and applies...
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Jason Ltd holds a 25% interest in the voting shares of Bourne Ltd and applies the equity method of accounting to its Investment in Bourne Ltd in its own books. At the date of acquisition of the shares in Bourne Ltd, the acquisition analysis identified there was goodwill of $15,500 reflected in the Investment in Bourne Ltd. The Jason Ltd board of directors believe this goodwill has been impaired by $2,500 in the prior year and $3,000 in the current year. Required: (a) Prepare the appropriate equity accounting adjustment (after tax 30%) required by Jason Ltd in the current year to reflect the impairment identified by the directors. (b) Briefly explain how and why your answer would differ if Jason Ltd was a parent company.
Jason Ltd holds a 25% interest in the voting shares of Bourne Ltd and applies the equity method of accounting to its Investment in Bourne Ltd in its own books. At the date of acquisition of the shares in Bourne Ltd, the acquisition analysis identified there was goodwill of $15,500 reflected in the Investment in Bourne Ltd. The Jason Ltd board of directors believe this goodwill has been impaired by $2,500 in the prior year and $3,000 in the current year.
Required:
(a) Prepare the appropriate equity accounting adjustment (after tax 30%) required by Jason Ltd in the current year to reflect the impairment identified by the directors.
(b) Briefly explain how and why your answer would differ if Jason Ltd was a parent company.
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