Question
SECTIONC: Associates and joint ventures Brown Ltd acquired a 28% interest in Bandicoot Ltd for $80000 cash on 1 July 2018. The directors of Brown
SECTIONC: Associates and joint ventures
Brown Ltd acquired a 28% interest in Bandicoot Ltd for $80000 cash on 1 July 2018. The directors of Brown Ltd believe this investment represents significant influence over the investee. The equity of Bandicoot Ltd at the acquisition date was as follows.
Share Capital $30,000
Retained earnings $120,000
All the identifiable assets and liabilities of Bandicoot Ltd were recorded at fair value. Profits and dividends for the years ended 30 June 2019 to 2020 were as follows.
Profit before tax Income tax expense Dividend Paid
2019 $90,000 $30,000 $70,000
2020 $80,000 $16,000 $25,000
Required:
Prepare journal entries in the records of Brown Ltd for each of the years ended 30 June 2019 to 2020 in relation to its investment in the associate, Bandicoot Ltd. (Assume Brown Ltd does not prepare consolidated financial statements.)
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