Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ella Ltd purchased 30% of the shares of Monica Ltd on 1 January 20X2 for cash of $320,000. This purchase resulted in Ella Ltd having

image text in transcribed Ella Ltd purchased 30% of the shares of Monica Ltd on 1 January 20X2 for cash of $320,000. This purchase resulted in Ella Ltd having significant influence over Monica Ltd. Additional information is provided below: - For the year ended 31 December 20X2, Monica Ltd reported profit of $100,000 and revalued its assets upwards by $50,000. - Monica Ltd's total dividends paid out to all shareholders during 20X2 amounted to $70,000. This was paid from profits made in 20X2. - Billy Ltd is 90% owned by Ella Ltd and is Ella's subsidiary. - During 20X2, Monica sold $120,000 of inventory to Billy Ltd and made profit of $60,000. As at 31 December 20X2, 20% of this inventory was still held by Billy Ltd. Required: a) Prepare journal entries for Ella Ltd in 202 to account for the above events using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Ella shares from Monica. b) Prepare journal entries for Ella Ltd in 20X2 to account for its investment in Monica Ltd using the Cost Method. Note: 1) Use the provided journal entry template for your response. 2) Workings/calculations or narrations are NOT required. 3) While the template provides sufficient space, if you encounter formatting issues or lack space, you can record your journal entries below the template. Make sure to indicate whether it's a Debit (DR) or Credit (CR) entry

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Oil And Gas Accounting

Authors: Steven M. Bragg

2nd Edition

1642210668, 9781642210668

More Books

Students also viewed these Accounting questions

Question

Find the trigonometric Fourier series for the waveform shown.

Answered: 1 week ago

Question

Timeline for implementation report

Answered: 1 week ago

Question

a. What aspects of the situation are under your control?

Answered: 1 week ago