Reference no: EM132911060

Problem 1: Kangaroo Ltd holds a 25% interest in the voting shares of Koala Ltd and applies the equity method of accounting to its Investment in Koala Ltd in its own books. At the date of acquisition of the shares in Koala Ltd, the acquisition analysis identified there was goodwill of $12,500. The Kangaroo Ltd board of directors believe the portion of goodwill belonging to Kangaroo Ltd has been impaired by $2,500 in the prior year and $3,000 in the current year. What is the equity accounted adjustment (after tax 30%) to the Investment in Koala Ltd or its relevant contra account, required by Kangaroo Ltd in respect of the current year?

a. Cr $5,500;
b. Cr $0.
c. Cr $3,000;
d. Cr $2,500;