prepare the journal entries in the records of moon ltd to account for the investment in comet Ltd under the equity method for the year ended 30 June 2018 assuming moon Ltd does not prepare consolidated financial statements. clearly show all working.

Associates and joint ventures (15 marks - about 20 minutes - see exam revision M11) On 1 July 2015, Moon Ltd purchased 40% of the shares of Comet Ltd for $63,200. At that date, equity of Comet Ltd consisted of: $ Share capital Retained Earnings 125,000 11,000 At 1 July 2015, the identifiable assets and liabilities of Comet Ltd were recorded at fair value. Information about income and changes in equity for both companies for the year ended 30 June 2018 was as shown below. Moon Ltd Comet Ltd ($) Profit before tax. (5) 126,000 (10,600) 15,400 Income tax expense 23,500 (5.400) 18,100 16,000 Profit after tax Retained profits - opening 18,000 ENG 2:15 PM Dividends paid Dividends declared Retained profits - closing 33,400 (5,000) (10,000) 18,400 34,100 (4,000) (5,000) 25,100 Additional information: (a) Moon Ltd recognises dividend revenue when dividends are declared (b) On 31 December 2016, Comet Ltd sold Moon Ltd a motor vehicle for $12,000. The vehicle had originally cost Comet Ltd $18,000 and was written down to $9,000 for both tax and accounting purposes at time of sale to Moon Ltd. Both companies depreciated motor vehicles at the rate of 20% p.a. on cost. (c) The beginning inventories of Comet Ltd included goods at $4,000 bought from Moon Ltd; their cost to Moon Ltd was $3,200. (d) The ending inventories of Moon Ltd included goods purchased from Comet Ltd at a profit before tax of $1,600. (e) The tax rate is 30%. Required: Prepare the journal entries in the records of Moon Ltd to account for the investment in Comet Ltd under the equity method for the year ended 30 June 2018 assuming Moon Ltd does not prepare consolidated financial statements. Clearly show all workings. ENG Associates and joint ventures (15 marks - about 20 minutes - see exam revision M11) On 1 July 2015, Moon Ltd purchased 40% of the shares of Comet Ltd for $63,200. At that date, equity of Comet Ltd consisted of: $ 125,000 Share capital Retained Earnings 11,000 At 1 July 2015, the identifiable assets and liabilities of Comet Ltd were recorded at fair value. Information about income and changes in equity for both companies for the year ended 30 June 2018 was as shown below. Moon Ltd Comet Ltd (5) (S) Profit before tax. Income tax expense 26,000 (10,600) 15,400 18,000 23,500 (5.400) 18.100 Profit after tax 16,000 Retained profits-opening 10,UVU 10,UUU Retailieu pronts - Opening 34,100 Dividends paid Dividends declared Retained profits - closing 33,400 (5,000) (10,000) 18,400 (4,000) (5,000) 25,100 Additional information: (a) Moon Ltd recognises dividend revenue when dividends are declared (b) On 31 December 2016, Comet Ltd sold Moon Ltd a motor vehicle for $12,000. The vehicle had originally cost Comet Ltd $18,000 and was written down to $9,000 for both tax and accounting purposes at time of sale to Moon Ltd. Both companies depreciated motor vehicles at the rate of 20% p.a. on cost. (c) The beginning inventories of Comet Ltd included goods at $4,000 bought from Moon Ltd; their cost to Moon Ltd was $3,200. (d) The ending inventories of Moon Ltd included goods purchased from Comet Ltd at a profit before tax of $1,600. (e) The tax rate is 30% Requireu. Prepare the journal entries in the records of Moon Ltd to account for the investment in Comet Ltd under the equity method for the year ended 30 June 2018 assuming Moon Ltd does not prepare consolidated financial statements. Clearly show all workings. ENG 2