Topic : Investment in associates

On 1 July 2016, Pandini Ltd acquired 25% of the shares of Amani Ltd for $400,000. The acquisition of these shares gave Pandini Ltd significant influence over Amani Ltd. At this date, the equity of Amani Ltd consisted of:

share capital $660 000

general reserve 100 000

retained earnings 440 000

At 1 July 2016, all the identifiable assets and liabilities of Amani Ltd were recorded at amounts equal to their fair values except for:

carrying amount fair value

land $1200 000 1600 000

plant ( cost $1200 000) 1000 000 1100 000

The plant was considered to have a further useful life of 5 years. The land was revalued in the records of Amani Ltd and the revaluation model applied in the measurement of the land. The tax rate is 30%.

At 30 June 2018, Amani Ltd reported the following information:

	$
Profit before tax	720,000
Income tax expense	(300,000)
Profit after tax	420,000
Retained earnings at 1 July 2017	820,000
	1,240,000
Dividends paid	(40,000)
Dividends declared	(50,000)
Transfer to general reserve	(30,000)
	(120,000)
Retained earnings at 30 June 2018	1,120,000
Share capital	640,000
General reserve	150,000
Asset revaluation surplus	310,000
Total equity	2,220,000

Amani Ltd also reported other comprehensive income relating to gains on revaluation of land of $10,000.

Required:

Prepare the journal entries for inclusion in the consolidation worksheet of Pandini Ltd at 30 June 2018 for the equity accounting of Amani Ltd.

be able to prepare accounts for each of the above-mentioned business combinations in accordance with relevant professional and statutory reporting requirements. thanks

Question 2	Max. marks allocated
Acquisition analysis	2
Workings	2
Consolidation entries	6
Total	10