Blupa Ltd acquired a 25% interest in Trinity Ltd for $145,000 on 1 July 2020. At that date, shareholders' equity of Trinity Ltd consisted of: Share Capital 280,000 Retained Earnings 86,000 All identifiable assets and liabilities of Trinity Ltd were recorded at fair value except for the machinery which was recorded at $25 000 below its fair value on 1 July 2020. Machinery is depreciated at 25% straight line. Information about income and changes in equity for Trinity Ltd for the year ended 30 June 2021 is as follows: Trinity Ltd Revenue 260,000 Expenses 120,000 Profit before income tax 140,000 Income tax expense 28,000 Profit for the period 112,000 Retained earnings (1/7/20) 86,000 198,000 Dividend paid 12,000 Dividend declared 35,000 47,000 Retained earnings (30/6/21) 151,000 Additional information: On 1 January 2021, Trinity Ltd sold Blupa Ltd equipment for $48,000. The equipment had originally cost Trinity Ltd $65,000'and had a carrying amount of $42,000 at the time of sale to Blupa Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost. During the year ended 30 June 2021, Trinity Ltd sold inventory to Blupa Ltd for $24,000. The cost of this inventory to Trinity Ltd was $21,500. Half of this inventory is still on hand at the end of the year. Blupa Ltd regards Trinity Ltd as an 'associate' company. The tax rate is 30%. Required: Prepare the journal entries required by Blupa Ltd relating to its Investment in Trinity Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Blupa Ltd prepares consolidated financial statements.
Blupa Ltd acquired a 25% interest in Trinity Ltd for $145,000 on 1 July 2020. At that date, shareholders' equity of Trinity Ltd consisted of: Share Capital 280,000 Retained Earnings 86,000 All identifiable assets and liabilities of Trinity Ltd were recorded at fair value except for the machinery which was recorded at $25 000 below its fair value on 1 July 2020. Machinery is depreciated at 25% straight line. Information about income and changes in equity for Trinity Ltd for the year ended 30 June 2021 is as follows: Trinity Ltd Revenue 260,000 Expenses 120,000 Profit before income tax 140,000 Income tax expense 28,000 Profit for the period 112,000 Retained earnings (1/7/20) 86,000 198,000 Dividend paid 12,000 Dividend declared 35,000 47,000 Retained earnings (30/6/21) 151,000 Additional information: On 1 January 2021, Trinity Ltd sold Blupa Ltd equipment for $48,000. The equipment had originally cost Trinity Ltd $65,000'and had a carrying amount of $42,000 at the time of sale to Blupa Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost. During the year ended 30 June 2021, Trinity Ltd sold inventory to Blupa Ltd for $24,000. The cost of this inventory to Trinity Ltd was $21,500. Half of this inventory is still on hand at the end of the year. Blupa Ltd regards Trinity Ltd as an 'associate' company. The tax rate is 30%. Required: Prepare the journal entries required by Blupa Ltd relating to its Investment in Trinity Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Blupa Ltd prepares consolidated financial statements.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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