Reference no: EM132522643
Buster Ltd is the ultimate entity in a group of companies. On 1 July 2018 Buster Ltd acquired a 35 per cent interest in Party Ltd for a cash consideration of $469 000. At the date of acquisition, the net assets of Party Ltd were recorded at fair value and are represented by equity as follows:
Share Capital 985,000
Retained Earnings 355,000
Total shareholder's fund 1,340,000
Additional information relating to the period ended 30 June 2020:
The opening Balance of Party's retained earnings as at 1 July 2019 was $530 000.
Party Ltd had an after-tax loss of $190 000 for the 2019/2020 period.
Party Ltd declared a $60 000 dividend out of post-acquisition profits. This dividend will not be paid until the following period. Buster Ltd accrues the dividends of associates as revenue when they are proposed.
The investment has been recorded in Buster's books in accordance with the cost method.
Required
Question 1: Prepare the appropriate general journal entries for the period ended 30 June 2020 for Buster Limited. Assume the company prepares consolidated financial statement (it is a parent entity as it controls several subsidiary companies).