On 1 July 2022 Larry Ltd acquires 25 per cent of the ordinary issued capital of Blaire Ltd for $187 500. Upon acquisition of this financial interest in Blaire Ltd, Larry Ltd appoints two directors to the eight-seat board of directors of Blaire Ltd.

Additional information

Larry Ltd recognises dividends only when received.

On 30 June 2023 Larry Ltd holds inventory sold to it by Blaire Ltd at a profit of $3750. This inventory is sold to Larry Ltd for $5000.

Blaire Ltd has a policy of paying dividends out of current year profits before utilising previous years’ profits.

The tax rate applicable for the year ending 30 June 2023 is 39 per cent.

Larry Ltd has a number of subsidiaries.

REQUIRED

Prepare the relevant equity accounting entries for Larry Ltd and its associate Blaire Ltd for the year ending 30 June 2023, in accordance with AASB 128.

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All of the identifiable net assets of Blaire Ltd are stated at fair value, except for the following: Carrying amount Fair value Difference ($) ($) 500 000 125 000 350 000 30 000 The depreciable assets are considered to have a further useful life of 10 years. The share capital and reserves of Blaire Ltd at 1 July 2022 are: $ Share capital 200 000 General reserve 37 500 Retained earnings 137 500 375 000 The financial statements of Larry Ltd and Blaire Ltd as at 30 June 2023 show: Reconciliation of opening and closing retained earnings for the year ending 30 June 2023 Larry Ltd Blaire Ltd ($) ($) 250 000 227 500 ($) Land 375 000 Depreciable assets 320 000 Profit before tax Income tax expense Profit after tax Retained earnings-opening (97 500) 152 500 Transfer to reserves Dividends paid Dividends proposed 130 000 282 500 (92 500) 135 000 (12 500) (45 000) (15 000) Retained earnings-closing 232 500 200 000 Page 1199Statements of financial position as at 30 June 2023 (15 000) (35 000) 137 500 272 500