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Clementine Co has owned 21% of the ordinary shares of Tangerine Co for several years. Clementine Co does not have any investments in any other companies. How should the investment in Tangerine Co be reflected in the financial statements of Clementine Co? A. The revenues and costs and assets and liabilities of Tangerine Co are added to the revenues and costs and assets and liabilities of Clementine Co on a line by line basis. B. An amount is shown in the statement of financial position for ‘investment in associate’ being the original cost paid for the investment plus Clementine Co’s share of the profit after tax of Tangerine Co. 21% of the profit after tax of Tangerine Co should be added to Clementine Co’s profit before tax in the income statement each year. C. An amount is shown in the statement of financial position under ‘investments’ being the original cost paid for the investment, this amount does not change. Dividends received from Tangerine are recognised in the income statement of Clementine Co. D. An amount is shown in the statement of financial position under ‘investments’ being the original cost paid for the investment, this amount does not change. 21% of the profit after tax of Tangerine Co should be added to Clementine Co’s profit after tax in the income statement each year. |