Mitchell Ltd acquired 20% of the voting shares of Ralph Ltd on 1 July 2021 for $135000. This acquisition resulted in Mitchell Ltd having significant influence over Ralph Ltd. At the date of acquisition, the shareholder's equity of Ralph is as follows: Share capital 185000 Retained profits 53000 238000 The following information relates to Ralph Ltd as at 30 June 2022, the end of financial year FY2022: Additional information: - Blue Ltd is 90% owned by Mitchell Ltd and is Mitchell's subsidiary. - During FY2022, Ralph sold $360000 of inventories to Blue Ltd and made profit of $150000. As at 30 June 2022,10% of the inventories were still held by Blue Ltd. Required: a) Prepare journal entries for Mitchell Ltd in FY2022 to account for its investment in Ralph Ltd using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Mitchell shares from Ralph. Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations are NOT required. 3) The template should provide enough space. However, if you find the space is insufficient in the template or encounter a table formatting issue, write your journal entries below the template and ensure labelling DR or CR. b) Which financial statement does the investment in associates account appear? What does the investment in associates account indicate? Mitchell Ltd acquired 20% of the voting shares of Ralph Ltd on 1 July 2021 for $135000. This acquisition resulted in Mitchell Ltd having significant influence over Ralph Ltd. At the date of acquisition, the shareholder's equity of Ralph is as follows: Share capital 185000 Retained profits 53000 238000 The following information relates to Ralph Ltd as at 30 June 2022, the end of financial year FY2022: Additional information: - Blue Ltd is 90% owned by Mitchell Ltd and is Mitchell's subsidiary. - During FY2022, Ralph sold $360000 of inventories to Blue Ltd and made profit of $150000. As at 30 June 2022,10% of the inventories were still held by Blue Ltd. Required: a) Prepare journal entries for Mitchell Ltd in FY2022 to account for its investment in Ralph Ltd using the Equity Method. Use the Reclassification Method to account for the profit and dividends that Mitchell shares from Ralph. Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations are NOT required. 3) The template should provide enough space. However, if you find the space is insufficient in the template or encounter a table formatting issue, write your journal entries below the template and ensure labelling DR or CR. b) Which financial statement does the investment in associates account appear? What does the investment in associates account indicate
