On 1 July 2023 Luganville Ltd purchased 45 per cent of the ordinary shares of Isangel Ltd for $2,925,000. The remaining 55 per cent of the ordinary shares of Isangel Ltd are owned by two shareholders, Lakatoro Ltd, which owns 30 per cent of the shares, and Norsup Ltd, which owns 25 per cent of the shares.

Isangel Ltds constitution provides that at general meetings of the company, ordinary shareholders are entitled to vote on resolutions and elect directors, on the basis of one vote per ordinary share. Isangel Ltds five-member board of directors consists of:

two representatives of Luganville Ltd

two representatives of Lakatoro Ltd

one representative of Norsup Ltd.

Each member of Isangel Ltds board of directors is entitled to one vote on issues/resolutions being considered by the board of directors.

The statement of financial position of Isangel Ltd immediately before the investment was as follows: Isangel Ltd Statement of financial position as at 1 July 2023

Assets $:

Cash 105,600

Accounts receivable 552,000

Inventory 1,056,000

Land 2,640,000

Buildings 7,776,000

(Accumulated depreciation) (1,296,000)

Plant and equipment 2,208,000

(Accumulated depreciation) (441,600)

Total assets $12,600,000

Liabilities $

Accounts payable 840,000

Bank loans 3,720,000

Deferred tax liability 1,200,000

Shareholders equity Share capital 4,320,000

Revaluation surplus 1,800,000

Retained earnings 720,000

Total shareholders equity and liabilities $12,600,000

Additional information:

On 1 July 2023, all the identifiable net assets of Isangel Ltd were considered to be recorded at fair value in Isangel Ltds statement of financial position, except land, which had a fair value of $3,240,000 on 1 July 2023.

On 30 June 2024, the recoverable amount of goodwill relating to the purchase of Isangel Ltd by Luganville Ltd was assessed to be $216,000.

On 14 July 2023, Isangel Ltd declared and paid an interim dividend of $192,000, out of profits earned during the 202223 financial year.

During 202324, Isangel Ltd earned a profit after income tax expense of $696,000, from which it paid a final dividend of $312,000.

During 202425, Isangel Ltd earned a profit after income tax expense of $816,000, from which it declared a final dividend of $384,000.

On 30 June 2025, Isangel Ltd revalued its land (to fair value as at that date) to $3,480,000.

The income tax rate is 40 per cent.

Required:

(a) Explain how Luganville Ltd should classify its investment in Isangel Ltd, in accordance with accounting standards.

(b) Prepare the journal entries to account for Luganville Ltds investment in Isangel Ltd, in Luganville Ltds individual accounts, for the financial years ending 30 June 2024 and 30 June 2025, in accordance with AASB 128 Investments in Associates and Joint Ventures, assuming that Luganville is a parent entity.

(c) Prepare the journal entries to account for Luganville Ltds investment in Isangel Ltd, in Luganville Ltds individual accounts, for the financial years ending 30 June 2024 and 30 June 2025, in accordance with AASB 128 Investments in Associates and Joint Ventures, assuming that Luganville is not a parent entity.

(d) Prepare the consolidation worksheet journal entries to account for Luganville Ltds investment in Isangel Ltd, for the financial years ending 30 June 2024 and 30 June 2025, in accordance with AASB 128 Investments in Associates and Joint Ventures, assuming that Luganville Ltd is a parent entity.