Prepare the journal entries in the records of pygmy ltd

Assignment Help Accounting Basics

Reference no: EM132894744

Exercise - Accounting for an associate/joint venture by an investor

On 1 July 2019 Pygmy Ltd issued ordinary shares to acquire a 40% interest in Possum Ltd. On this date, these issued shares had a fair value of $170 ?000. The directors of Pygmy Ltd be- lieve that they have significant influence over the financial and operating policy decisions of Possum Ltd. The share capital, reserves and retained earnings of Possum Ltd at the acquisi- tion date and at 30 June 2020 were as follows.

At 1 July 2019, all the identifiable assets and liabilities of Possum Ltd were recorded at fair value.

The following is applicable to Possum Ltd for the year to 30 June 2020.

• Profit (after income tax expense of $11 ?000): $39 ?000.
• Increase in reserves:
- General (transferred from retained earnings): $15 ?000.
- Asset revaluation (revaluation of freehold land and buildings at 30 June 2020): $100 ?000.
• Dividends paid to shareholders: $15 ?000.
• The tax rate is 30%.
• Pygmy Ltd does not prepare consolidated financial statements.

Required
Prepare the journal entries in the records of Pygmy Ltd for the year ended 30 June 2020 in relation to its investment in the associate, Possum Ltd.

Reference no: EM132894744

Questions Cloud

Civil lawsuit for addressing problem : Imagine you are addressing a person who is deeply involved in personal conflict with a long-term business associate over a breach of contract. Tell this party,

List and explain 4 organizational structure : List and explain 4 Organizational structure. Which is the Best structure and why?

Cost of debt using book valuation : What is the cost of debt using Book Valuation? What is the Net Present Value of the proposed Project?

What is working capital : What is working capital and where do we find this in a financial statement?

Prepare the journal entries in the records of pygmy ltd : Prepare the journal entries in the records of Pygmy Ltd for the year ended 30 June 2020 in relation to its investment in the associate, Possum Ltd

Evaluate any concern over using ar technology for retraining : Examine how using AR/VR technology enhances the human experience during training and development. Analyze Technologies that enhance the human experience

Alibaba growth-innovation and financing strategies : Analyze which characteristics of Alibaba's growth, innovation, and financing strategies are typical of successful entrepreneurial firms

Favorite example of analytics-driven revenue generation : Can you share a favorite example of analytics-driven revenue generation OR your favorite analytics-driven entrepreneurial venture?

Prepare the journal entries to record income taxes : Assuming that it is more likely than not that $26,000 of the deferred tax asset will not be realized, prepare journal entries to record income taxes for 2020

User Account

All Pages