Blupa Ltd acquired a 25% interest in Trinity Ltd for $145,000 on 1 July 2020. At that date, shareholders' equity of Trinity Ltd consisted of: Share Capital 280,000 Retained Earnings 86,000 All identifiable assets and liabilities of Trinity Ltd were recorded at fair value except for the machinery which was recorded at $25 000 below its fair value on 1 July 2020. Machinery is depreciated at 25% straight line. Information about income and changes in equity for Trinity Ltd for the year ended 30 June 2021 is as follows: Trinity Ltd Revenue 260,000 Expenses 120,000 Profit before income tax 140,000 Income tax expense 28,000 Profit for the period 112,000 Retained earnings (1/7/20) 86,000 198,000 Dividend paid 12,000 Dividend declared 35,000 47,000 Retained earnings (30/6/21) 151,000 Additional information: On 1 January 2021, Trinity Ltd sold Blupa Ltd equipment for $48,000. The equipment had originally cost Trinity Ltd $65,000'and had a carrying amount of $42,000 at the time of sale to Blupa Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost. During the year ended 30 June 2021, Trinity Ltd sold inventory to Blupa Ltd for $24,000. The cost of this inventory to Trinity Ltd was $21,500. Half of this inventory is still on hand at the end of the year. Blupa Ltd regards Trinity Ltd as an 'associate' company. The tax rate is 30%. Required: Prepare the journal entries required by Blupa Ltd relating to its Investment in Trinity Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Blupa Ltd prepares consolidated financial statements.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Blupa Ltd acquired a 25% interest in Trinity Ltd
for $145,000 on 1 July 2020. At that date,
shareholders' equity of Trinity Ltd consisted of:
Share Capital
280,000
Retained Earnings
86,000
All identifiable assets and liabilities of Trinity
Ltd were recorded at fair value except for the
machinery which was recorded at $25 000
below its fair value on 1 July 2020. Machinery
is depreciated at 25% straight line.
Information about income and changes in
equity for Trinity Ltd for the year ended 30
June 2021 is as follows:
Trinity Ltd
Revenue
260,000
Expenses
120,000
Profit before income tax
140,000
Income tax expense
28,000
Profit for the period
112,000
Retained earnings (1/7/20)
86,000
198,000
Dividend paid
12,000
Dividend declared
35,000
47,000
Retained earnings (30/6/21)
151,000

Additional information:
On 1 January 2021, Trinity Ltd sold Blupa Ltd
equipment for $48,000. The equipment had
originally cost Trinity Ltd $65,000'and had a
carrying amount of $42,000 at the time of sale
to Blupa Ltd. Both companies depreciate
equipment at the rate of 10% per annum on
cost.
During the year ended 30 June 2021, Trinity Ltd
sold inventory to Blupa Ltd for $24,000. The
cost of this inventory to Trinity Ltd was $21,500.
Half of this inventory is still on hand at the end
of the year.
Blupa Ltd regards Trinity Ltd as an 'associate'
company.
The tax rate is 30%.
Required:
Prepare the journal entries required by Blupa
Ltd relating to its Investment in Trinity Ltd and
subsequent transactions for the period from 1
July 2020 to 30 June 2021 assuming Blupa Ltd
prepares consolidated financial statements.

Expert Solution

Step 1

Journal -

A journal is a thorough account that documents all of a company's financial activities. It is used for account reconciliation in the future and for the transfer of data to other official accounting records, including the general ledger. In a double-entry accounting style, a journal typically includes the date of a transaction, the accounts that were impacted, and the sums.

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