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Prepare journal entries under both the cost and equity

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Reference no: EM133013954

Question - On 1 July 2018 P Ltd acquires 25 per cent of issued capital of Q Ltd for a cash consideration of $37,500. At the date of the acquisition, the shareholders' equity of Q Ltd is: Share capital $120,000 and Retained earnings $30,000.

Additional information: For year ending 30 June 2019, Q Ltd records an after-tax profit of $30,000 and pays the $25,000 dividend.

For the year ending 30 June 2020, Q records an after-tax loss of $20,000 and pays $5,000 dividend.

P Ltd has a number of subsidiaries.

Required -

(i) Prepare journal entries under both the cost and equity method of accounting for the investment in Q Ltd for each of the years ended 30 June 2019 to 30 June 2020.

(ii) Calculate the carrying amount of the investment in Q Ltd at 30 June 2020.

Reference no: EM133013954

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