Prepare journal entries in the records of ABC Ltd for each

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Question - ABC Ltd acquired a 25% interest in XYZ Ltd for $125,?000 cash on 1 July 2019. The directors of ABC Ltd believe this investment represents significant influence over the investee. The equity of XYZ Ltd at the acquisition date was as follows: Share capital $400,000 and Retained earnings $100,000.

All the identifiable assets and liabilities of XYZ Ltd were recorded at fair value. For the year ended 30 June 2020, XYZ Ltd records an after tax profit $60,000 and declares a dividend of $20,000. For the year ending 30 June 2020, XYZ Ltd revalues its land upwards by an amount of $50,000.

The corporate tax rate is 30%.

Prepare journal entries in the records of ABC Ltd for each of the years ended 30 June 2019 and 30 June 2020 in relation to its investment in the associate, XYZ Ltd.

Reference no: EM133011577

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