Reference no: EM133062315

Question - On 1 July 2019, Gant Ltd purchased 35% of the shares of Cold Ltd at a cost of $98,000. Gant Ltd does not control Cold Ltd but does have significant influence. The carrying amounts of Cold Ltd's net assets (at fair value) at date of acquisition and subsequent balance dates were as follows:

Equity	1/7/2019	30/6/2020	30/6/2021
Share capital	215,000	215,000	215,000
Revaluation reserve	10,000	12,000	12,000
Retained earnings	55,000	150,000	200,000

On 25 September 2019, Gant Ltd paid a final dividend of $30,000 from profits that existed at date of acquisition. On 5 June 2021 Cold Ltd paid a final dividend of $25,000 from current period profits. No other dividends have been paid.

Required -

1. Prepare the journal entries required by Gant Ltd relating to its Investment in Cold Ltd for the period from 1 July 2019 to 30 June 2021.

2. Show the journal entry(s) and explain how Gant Ltd would record the Investment in Cold Ltd under the Equity method as at 1 July 2019 if the purchase consideration had been $127,000.