Reference no: EM132359914
Question :
On 1 July 2014, Xavier Lid acquired a 25% interest in Logan Lid for a cash consideration of $180 000.
The share capital and reserves of Logan Lid at the date of acquisition are:
Share capital $300 000
Retained carnings $385 000
Total shareholders' equity $685 000
Additional information:
. For the year ending 30 June 2015, Logan Lid records an after-tax profit of $80 000. A dividend of $20,000 is declared on 30 June 2015 but is not paid until 31 August 2015.
. For the year ending 30 June 2016, Logan Lid records an after-tax profit of $200 000. A dividend of $90,000 is declared on 15 June 2016 but remains unpaid as at 30 June 2016.
. For the year ending 30 June 2017, Logan Ltd records a loss of $500 000 and no dividend is declared.
. Xavier Lid has no subsidiaries and the tax rate is 30%.
Required:
Prepare the journal entries required for Xavier Ltd to account for its associate for the year ending 30 June 2016 using the equity method.