You are preparing the annual accounts of the Lulu Group of companies. On 1 July 2020, Lulu Ltd (LL) acquired a 25 per cent interest in Haha Ltd (HL) for a cash consideration of $80,000. LL is considered to have significant influence over HL, since LL is able to appoint a director to HLs Board of Directors, and LL is a major customer of HL. LL also provides management personnel to HL, and the two companies share technical information. On the date of the acquisition, the assets of HL were reported at fair value. The share capital and reserves of HL at the date of acquisition were:

Share capital 60,000 Retained earnings 100,000 Total shareholders equity $160,000

Additional information

• For the year ending 30 June 2021, HL recorded an after-tax profit of $100,000, from which it paid a dividend of $40,000.
• On 30 June 2021, HL revalued its Land upwards by $10,000. Before this revaluation, the Land had a carrying amount of $20,000. Any profit on a future sale of the Land will not be taxable.
• LL also has a subsidiary, Studebaker Ltd, which it purchased in 2017 for $240,000, and of which it owns 100 per cent of the shares on issue.

REQUIRED:

Prepare all the necessary journal entries in respect of LLs investment in HL using the equity method of accounting for the year ended 30 June 2021. Provide explanations for each journal in each journals narration.