How to calculate the estimated recoverable amount of a long term equity investment?

If the said long-term equity investment is during the holding period, the recoverable amount is greater than the cost, and there is no need for accounting treatment, but if it is the opposite, the impairment loss should be accrued, and the entry is:

Borrow: Asset impairment loss.

Credit: Provision for impairment of long-term equity investments.

If it is a disposal of a long-term equity investment, the amount of the long-term equity investment is greater than the cost. Then it is included in the investment income, and the entry is:

Borrow: Bank deposit.

Credit: Long-term Equity Investment Cost Profit and Loss Adjustment.

The higher of the net price of the investment and the present value of the expected future cash flows from the holding and disposal of the investment at maturity shall be the recoverable amount of the investment. The net price of the investment is the balance of the investment minus the relevant taxes incurred in disposing of the investment.

Earnings from long-term investments: divided into dividends and bonus shares. The lower the theoretical net profit of the listing, the higher the expected return.

1. The accounting of long-term equity investment by an enterprise due to additional investment and other reasons is changed from the cost method to the equity method, and the book value of the equity investment shall be taken as the initial investment cost according to the book value of the equity investment when the enterprise actually obtains control or joint control of the investee or has a significant impact on the investee, and the difference between the initial investment cost and the share of the owner's equity of the investee shall be regarded as the equity investment difference, and shall be amortized in accordance with the provisions of this system and included in profit or loss.

2. When the enterprise no longer has control, joint control or significant influence on the investee due to the reduction of investment, it shall suspend the use of the equity method of accounting and replace it with the cost method, and use the book value of the investment as the new investment cost. Subsequently, when the investee declares a distribution of profits or cash wins, the part that has been credited to the book value of the investment will be used as a recovery of new investment costs to offset the book value of the investment.

Therefore, in the question:

1. The investment income recognized in the current year is limited to the profit formed from July to December, that is, 600 000 * 10% + 30%) = 240 000 yuan. Preparation of accounting entries:

Borrow: long-term equity investment profit and loss adjustment of $240,000.

Credit: investment income $240,000.

For the profit formed from January to June, the investment income is not recognized, but it is used as a component of the owner's equity of the investee on the date of additional investment to calculate the equity investment difference.

2. Since the cash dividends issued by the investee belong to the profits of previous years, the investment enterprise shall use them as a recovery of the investment cost to offset the book value of the investment when it receives it.

If the cash dividend of 1 million yuan in the question is declared and registered after July 1, then:

Cash dividend = 1 000 000 * 35% -25%) = 100 000 yuan.

Borrow: bank deposit or dividend receivable $100,000.

Credit: Long-term equity investment of 100,000 yuan.