Henna Limited acquired 100% Sophie Limited at $3,000 on 1 January 2018. The share capital and retained earnings of Sophie Limited were $1,000 and $1,600 respectively on 1 January 2018. The book value of the assets is approximately equal to the fair value on that date.

As at 31 December 2021, the retained earnings of Sophie Limited was $3,100. No new shares were issued since 1 January 2018.

Henna Limited disposed 60% its shareholding to a third party at $3,200 on 31 December 2021. Hanna Limited exercises significant influence over Sophie Limited after the disposal.

The fair value of the remaining 40% shareholding is $2,300 on 31 December 2021

Required

a. Calculate the gain or loss on disposal of the 60% shareholdings of Sophie Limited in the separate and consolidated financial statements of Henna Limited for the year ended 31 December 2021.

b. Prepare a reconciliation of the gain or loss on disposal in the separate financial statements and the consolidated financial statements.

c. Prepare the journal entries to be included in the separate and consolidated financial statements of Henna Limited regarding the disposal of Sophie Limited for the year ended 31 December 2021.