When a company applies the initial value method in accounting for its investment in a subsidiary, and the subsidiary reports income in excess of dividends paid, what entry would be made for a consolidation worksheet for the second year?

The entry would be:

Dr Investment in Subsidiary  XX

Cr                 Retained Earnings XX

Explanation:

The IFRS says that the invesments in associates must be accounted for in accordance to equity method. Which says the net difference of profit after tax and dividends received would will go to investment in associate account and the dividend received would go to the retained earnings because it has been cashed.

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