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2 marksRecording Financial Information

CAPE Accounting Unit 1 · 2019 · Paper 2 · Question 1(c)(ii)

On 01 January 2017, Crabtree Corporation pays cash of 450 000 for 45% of the common stock and net assets of Passion Ltd. For the year ended 31 December 2017, Passion Ltd reported net income of 126 000 and declared and paid $50 000 in dividends to its common shareholders.

In the books of Crabtree Corporation, calculate the closing balance of the investment in Passion Ltd on the books of Crabtree Corporation.

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Other parts of this question

  1. 1(a)Prepare the journal entries to record the transactions.[10 marks]
  2. 1(b)Outline FOUR basic rights that are associated with the ownership of a share of common stock.[8 marks]
  3. 1(c)(i)In the books of Crabtree Corporation, prepare the journal entries to account for this investment.[6 marks]
  4. 1(d)(i)List THREE reasonable assurances that should be provided by internal accounting controls.[3 marks]
  5. 1(d)(ii)Explain how revenues are reported on the income statements under BOTH the cash basis of accounting and the accrual basis of accounting and give ONE example of…[6 marks]

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