Question
Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2023. Information relating to the period ended 30 June 2025 is
Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2023.
Information relating to the period ended 30 June 2025 is as follows:
In the previous period, consolidation adjustments had a net effect of $61 250 (debit) to the Investment account in Bud Ltd.
Bud Ltd had an after-tax profit of $190 000 for the 2024/2025 period.
Bud Ltd revalued the land upward during the period by $100 000.
Bud Ltd declared a $60 000 dividend out of post-acquisition profits. This dividend will not be paid until the following period.
Flower Ltd accrues the dividends of associates as revenue when they are proposed. The investment has been recorded in Flower's books in accordance with the cost method.
What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2025 assuming that Flower Ltd is a parent entity (Ignore tax)?
Group of answer choices
| Dr | Investment in Bud Ltd | 61 250 |
|
| Cr | Retained earnings beginning |
| 61 250 |
| Dr | Investment in Bud Ltd | 66 500 |
|
| Cr | Share of associate's profit |
| 66 500 |
| Dr | Investment in Bud Ltd | 35 000 |
|
| Cr | Asset revaluation reserve |
| 35 000 |
| Dr | Dividend revenue | 21 000 |
|
| Cr | Investment in Bud Ltd |
| 21 000 |
| Dr | Investment in Bud Ltd | 66 500 |
|
| Cr | Share of associate's profit |
| 66 500 |
| Dr | Investment in Bud Ltd | 35 000 |
|
| Cr | Asset revaluation reserve |
| 35 000 |
| Dr | Dividend revenue | 21 000 |
|
| Cr | Investment in Bud Ltd |
| 21 000 |
| Dr | Dividend revenue | 66 500 |
|
| Cr | Dividend receivable |
| 66 500 |
| Dr | Land | 35 000 |
|
| Cr | Asset revaluation reserve |
| 35 000 |
| Dr | Investment in Bud Ltd | 61 250 |
|
| Cr | Retained earnings |
| 61 250 |
| Dr | Investment in Bud Ltd | 66 500 |
|
| Cr | Share of associate's profit |
| 66 500 |
| Dr | Dividend revenue | 66 500 |
|
| Cr | Dividend receivable |
| 66 500 |
| Dr | Land | 35 000 |
|
| Cr | Asset revaluation reserve |
| 35 000 |
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Financial Accounting An Introduction
Authors: Mr Barry Elliott, Mr Augustine Benedict
2nd Edition
0273737651, 9780273737650
