Mark Ltd has an investment in Lee Ltd acquired on 1 July 2021 and no other subsidiary investments. Consideration paid by Mark Ltd for a 30% interest in Lee Ltd was $50 000, entering into a joint venture with three other venturers. The directors believe they have significant influence over Lee Ltd. Information on Lee Ltds equity position is as follows.

At acquisition, all identifiable assets and liabilities of Lee Ltd were recorded at fair value except for the Equipment that had a fair value of $20 000 greater than carrying amount. The Equipment was considered to have a further useful life of 5 years at acquisition. On 1 January 2022, Mark Ltd sold Lee Ltd a vehicle for $40 000, at a profit before tax of $5 000. Both companies treat vehicles as non-current assets and charge depreciation at 20% p.a. straight line basis. At 30 June 2023, Mark Ltd had inventories on hand purchased from Lee Ltd for a cost of $35 000. Lee Ltd had made a profit before tax of $10 000 on the sale to Mark Ltd. Assume a tax rate of 30%. Dividends can be assumed to be out of current year profits. Dividend revenue is recognised when declared by investors. Information about income and changes in equity for the year ended 30 June 2023 is as follows:

a. In relation to the investment in Lee Ltd, calculate Mark Ltds share of profit and post-acquisition equity for 30 June 2022 and 2023 according to the requirements of AASB 128 Investments in Associates and Joint Ventures.

b. If Lee Ltd incurred a loss in the year ended 30 June 2023, what impact would this have on Mark Ltds investment? If this loss resulted in the investment being less than $0, explain the treatment in their books in 2023 and future years? Include an example to support your answer.

c. If Mark Ltd was also the parent of a wholly owned subsidiary and required to prepare consolidated accounts in accordance with AASB 10 Consolidated Financial Statements, describe how the journal entries would differ. Use an example from your workings to demonstrate the difference.

1 July 2021 30 June 2022 $ 60 000 Share capital General reserve Retained earnings $ 60 000 10 000 110 000 20 000 Mark Ltd Lee Ltd Profit before income tax Less: Income tax expense Profit Plus: Retained earnings (1/7/22) 125 000 37 500 87 500 250 000 50 000 15 000 35 000 110 000 337 500 20 000 Less: Dividend paid Less: Dividend declared Retained earnings (30/6/23) 145 000 7 500 7 500 130 000 317 500