QUESTION 5-Equity method (18 marks) Violin Ltd, a reporting entity, acquired a 40% interest in the issued capital of Flute Ltd for $160,000 on 1 July 2018. Violin Ltd has signed a joint venture agreement with the other investors in Flute Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Flute Ltd at the investment date and at 30 June 2019 were as follows: 30 June 2019 1 July 2018 $ 300,000 Issued capital Asset revaluation surplus General reserve Retained earnings Total shareholders' equity 300,000 100,000 15,000 99,000 514,000 100,000 400,000 At 1 July 2018, all the identifiable assets and liabilities of Flute Ltd were recorded at amounts equal to their fair values. Additional Information: On 30 July 2018, Flute Ltd paid a final dividend of $10,000 from profits that existed at date of acquisition On 10 June 2019, Flute Ltd paid a final dividend of $15,000 from current period profits. For the financial year ended 30 June 2019, Flute Ltd made a profit after tax of $39,000 (income tax expense of $11,000). Increases in reserves reported during the year were as follows: General (transferred from retained earings): Asset revaluation (revaluation of freehold land and buildings at 30 June 2019): $15,000 $100,000 Violin Ltd does not prepare consolidated financial statements. The tax rate is 30%. Required: in accordance with the requirements of AASB 128 Investment in Associates and Joint Ventures, A. Prepare the journal entries required by Violin Ltd relating to its Investment in Flute Ltd and subsequent transactions for the period from 1 July 2018 to 30 June 2019. Be sure to specify date in your answer. (14 marks) B. Show the journal entry and explain how Violin Ltd would record the Investment in Flute Ltd under the Equity method as at 1 July 2018 if the purchase consideration had been $150,000, (4 marks) I QUESTION 5-Equity method (18 marks) Violin Ltd, a reporting entity, acquired a 40% interest in the issued capital of Flute Ltd for $160,000 on 1 July 2018. Violin Ltd has signed a joint venture agreement with the other investors in Flute Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Flute Ltd at the investment date and at 30 June 2019 were as follows: 30 June 2019 1 July 2018 $ 300,000 Issued capital Asset revaluation surplus General reserve Retained earnings Total shareholders' equity 300,000 100,000 15,000 99,000 514,000 100,000 400,000 At 1 July 2018, all the identifiable assets and liabilities of Flute Ltd were recorded at amounts equal to their fair values. Additional Information: On 30 July 2018, Flute Ltd paid a final dividend of $10,000 from profits that existed at date of acquisition On 10 June 2019, Flute Ltd paid a final dividend of $15,000 from current period profits. For the financial year ended 30 June 2019, Flute Ltd made a profit after tax of $39,000 (income tax expense of $11,000). Increases in reserves reported during the year were as follows: General (transferred from retained earings): Asset revaluation (revaluation of freehold land and buildings at 30 June 2019): $15,000 $100,000 Violin Ltd does not prepare consolidated financial statements. The tax rate is 30%. Required: in accordance with the requirements of AASB 128 Investment in Associates and Joint Ventures, A. Prepare the journal entries required by Violin Ltd relating to its Investment in Flute Ltd and subsequent transactions for the period from 1 July 2018 to 30 June 2019. Be sure to specify date in your answer. (14 marks) B. Show the journal entry and explain how Violin Ltd would record the Investment in Flute Ltd under the Equity method as at 1 July 2018 if the purchase consideration had been $150,000, (4 marks)