Question

QUESTION 1 Strawberry Ltd, a reporting entity, acquired a 40% interest in the issued capital of Cream Lid for $220.000 on 1 July 2019. Strawberry Ltd has signed a joint venture agreement with the other investors in Cream Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Cream Ltd at the investment date and at 30 June 2020 were as follows: 1 July 2019 $ 400.000 Issued capital Asset revaluation surplus General reserve Retained earnings Total shareholders' equity 30 June 2020 s 400.000 100,000 20,000 99,000 619,000 100.000 500.000 At 1 July 2019, all the identifiable assets and liabilities of Cream Lid were recorded at amounts equal to their fair values. Additional Information: On 30 July 2019, Cream Ltd paid a final dividend of $10,000 from profits that existed at date of acquisition On 10 June 2020, Cream Led paid a final dividend of $15,000 from current period profits, For the financial year ended 30 June 2020, Cream Ltd made a profit after tax of 549,000 (income tax expense of $11,000),

Answer 1

Answer: ㅎ Date Transaetion Debits (5) Credit() 1st July 2019 share capital Alc or Invesiment in acccpiries 2, 20,000 2,20,00D 30 - July Retained Earnings AC or Dividend 10,000 10.000 10 Tun Retained Alcor Eaming Dividend 15.000 15,000 30 - Jun 49.000 net profit Al Dr Equity Shorehokkeys AC Retained Earnings AL DI Ceneral Reserve 49.000 20,000 20,000 30 Jun Land & Building AIC DY capital Appreciation 1,00,000 1,00,000