On 1 July 2017, Bolan Ltd purchased 40% of the shares of Rex Ltd for $151 680 and signed a joint venture agreement with the two other shareholders in Rex Ltd. At that date, equity of Rex Ltd consisted of:
Required A. Prepare the journal entries in the records of Bolan Lid to account for the investment in Rex Ltd in accordance with AASB 128 for the year ended 30 June 2020 assuming Bolan Lid does not prepare consolidated financial statements. B. Prepare the consolidated worksheet entries in relation to the investment in Rex Lid, assuming Bolan Lid does prepare consolidated financial statements at 30 June 2020. In both parts show in addition to the journal entries the calculation of the NCI's share of the profit after the adjustments for inter entity transfers.This Assignment is worth 20% of the total assessment for this unit. This assignment will be marked out of 80 and scaled down to being out of 20. The assignment has 4 questions. Question 1. On 1 July 2017, Bolan Lid purchased 40% of the shares of Rex Lid for $151 680 and signed a joint venture agreement with the two other shareholders in Rex Lid. At that date, equity of Rex Lid consisted of: Share capital $300 000 Retained earnings 26 400 At 1 July 2017, the identifiable assets and liabilities of Rex Lid were recorded at amounts equal to their fair values. Information about income and changes in equity for both companies for the year ended 30 June 2020 was as shown. Bolan Ltd Rex Ltd Profit before tax $ 62 400 $ 56 400 Income tax expense (25 440) (12 960) Profit 36 960 43 440 Retained earnings (1/7/19) 43 200 38 400 80 160 81 840 Dividend paid (12 000) (9 600) Dividend declared (24 000) (12 000) (36 000) (21 600) Retained earnings (30/6/20) $ 44 160 $ 60 240 Additional information (a) Bolan Ltd recognised the final dividend revenue from Rex Lid before receipt of cash. Rex Lid declared a $14 400 dividend in June 2019, this being paid in August 2019. (b) On 31 December 2019, Rex Lid sold Bolan Lid a motor vehicle for $28 800. The vehicle had originally cost Rex Lid $43 200 and was written down to $21 600 for both tax and accounting purposes at time of sale to Bolan Lid. Both companies depreciated motor vehicles at the rate of 20% p.a. on cost. (c) The beginning inventory of Rex Lid included goods at $9 600 bought from Bolan Lid; their cost to Bolan Lid was $7 680. (d) The ending inventory of Bolan Lid included goods purchased from Rex Lid at a profit before tax of $3 840. (e) The tax rate is 30%
