Facts
A acquired 30% of the issued capital of B for $1 million on December 31, 20X5. The accumulated profits at that date were $2 million. A appointed three directors to the board of B, and A intends to hold the investment for a significant period of time. The companies prepare their financial statements to December 31 each year. The abbreviated balance sheet of B on December 31, 20X7 is
|
Sundry net assets |
$6 million |
|
Issued share capital of $1 |
$1 million |
|
Share premium |
$2 million |
|
Retained earnings |
$3 million |
B had made no new issues of shares since the acquisition of the investment by A. The recoverable amount of net assets of B is deemed to be $7 million. The fair value of the net assets at the date of acquisition was $5 million.
Required
What amount should be shown in A’s consolidated balance sheet at December 31, 20X7, for the investment in B?