Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2003 for a cash consideration of $469,000. Bud Ltd's assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows:

Additional information relating to the period ended 30 June 2005:
The opening balance of Bud's retained earnings was $500,000. Bud Ltd had paid a dividend out of pre-acquisition profits of $30,000 during the 2003/2004 period.
Bud Ltd had an after-tax profit of $190,000 for the 2004/2005 period.
Bud Ltd revalued land during the period, creating an asset revaluation reserve of $100,000.
Bud Ltd declared a $60,000 dividend out of post-acquisition profits. This dividend will not be paid until the following period.
Flower Ltd accrues the dividends of associates as revenue when they are proposed. The investment has been recorded in Flower's books in accordance with the cost method. What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2005?
E) None of the given answers.

Question

Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2003 for a cash consideration of $469,000. Bud Ltd's assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows:

Additional information relating to the period ended 30 June 2005:
The opening balance of Bud's retained earnings was $500,000. Bud Ltd had paid a dividend out of pre-acquisition profits of $30,000 during the 2003/2004 period.
Bud Ltd had an after-tax profit of $190,000 for the 2004/2005 period.
Bud Ltd revalued land during the period, creating an asset revaluation reserve of $100,000.
Bud Ltd declared a $60,000 dividend out of post-acquisition profits. This dividend will not be paid until the following period.
Flower Ltd accrues the dividends of associates as revenue when they are proposed. The investment has been recorded in Flower's books in accordance with the cost method. What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2005?
E) None of the given answers.

Quizplus · Accepted Answer

The Answer of Flower Ltd acquired a 35 per cent interest in Bud Ltd on 1 July 2003 for a cash consideration of $469,000. Bud Ltd's assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows:

Additional information relating to the period ended 30 June 2005:
The opening balance of Bud's retained earnings was $500,000. Bud Ltd had paid a dividend out of pre-acquisition profits of $30,000 during the 2003/2004 period.
Bud Ltd had an after-tax profit of $190,000 for the 2004/2005 period.
Bud Ltd revalued land during the period, creating an asset revaluation reserve of $100,000.
Bud Ltd declared a $60,000 dividend out of post-acquisition profits. This dividend will not be paid until the following period.
Flower Ltd accrues the dividends of associates as revenue when they are proposed. The investment has been recorded in Flower's books in accordance with the cost method. What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2005?
E) None of the given answers.

Flower Ltd Acquired a 35 Per Cent Interest in Bud