Question
On January 2, 2026 Thornvale Foods paid $450,000 cash for 30% of the ordinary shares of a regional bakery chain, giving it significant influence. The bakery is therefore an associate, accounted for using the equity method.
- On October 15, 2026 the bakery paid total dividends of $80,000.
- The bakery's profit for 2026 was $200,000.
Required:
- Journal Entries — the purchase, the dividend received and Thornvale's share of the year's profit. Use Investment in Associate, Share of Profit of Associate and Cash.
- Carrying Amount — the investment at December 31, 2026.
- Statement Impact — the effect of the October 15 dividend on Thornvale's statements.
Statements in this challenge
- Journal EntriesJournal Entry
- Carrying AmountNumeric Answer
- Statement ImpactStatement Impact
Scoring
- 40% Account naming / line matching
- 40% Amount correctness
- 20% Structure / section placement
IFRS 9 — Financial Instruments
Classification drives the accounting, so settle it first: amortised cost, fair value through profit or loss, or fair value through other comprehensive income. Only then decide where remeasurement gains and losses land, because the same price movement is reported in different places under different classifications.
Common mistakes
- Routing a fair value movement through profit or loss when the instrument is measured at FVOCI, or the reverse.
- Capitalising transaction costs on an instrument held at fair value through profit or loss, where they are expensed.
- Forgetting to remove the cumulative gain or loss from equity on the disposal of an FVOCI investment.
Further readingIFRS 9: measuring financial instruments