Calculations of equity accounting for Harrison Ltd.

Part A (6 marks) Harrison Ltd, a parent company, has a 25% investment (and hence significant inuence) in Lorraine Ltd for 10 years. Harrison's accountant has mislaid the le of equity accounting memoranda and has asked you to reconstruct the information from the following data: The investment cost is $600 000. Lorraine made a $300 000 dividend appropriation in the nal quarter of the current year. The dividend was from current year prot. 0 There is no need to make fair value adjustments to amounts reported by Lorraine. o Impairments of the investment's equity method carrying amount totalled $30 000, all relating to previous years. Impairment recognition in Harrison's separate nancial statements was not necessary. There are no intercompany transactions. Equities of Lorraine, under the cost basis, are at: Acquisition date Start of current year End of current year $ s s Paid-up capital 1 200 000 1 200 000 l 200 000 Retained prots 700 000 Required: Prepare memoranda journal entries to convert from the cost basis to the equity method of accounting for the current year. Narrations are not required