Question

On 1 July 2019 ABC Ltd acquired 50 000 shares in DEF Ltd at a price...

On 1 July 2019 ABC Ltd acquired 50 000 shares in DEF Ltd at a price of $20 each. There were brokerage fees of $1000. The closing market price of DEF Ltd shares on 30 June 2020 which is the entity’s financial year end was $24. ABC Ltd has not made the election to account for its equity investments at fair value through Other Comprehensive Income.

Required:

Prepare the relevant journal entries for ABC Ltd to account for the investment in DEF Ltd using fair value through profit or loss.

Homework Answers

Answer #1

1)Shares in DEF Ltd a/c DR (50000*20) $100000

Brokerage a/c DR $1000

To Bank a/c CR $ 102000

( Being shares purchased in DEF LTD)

2)Fair value through profit or loss a/c DR $2000

To Brokerage a/c CR $ 2000

(Being shares purchased in DEF LTD)

3) Shares in DEF Ltd a/c (50000*$ 4)DR $20000

To Profit on valuation of shares in DEF Ltd CR $20000

( Being profit on shares recognised on valuation date)

4) Profit on valuation of shares in DEF Ltd DR $20000

To Fair value through profit or loss a/c CR $ 20000

( Being profit on shares recognised on valuation date transfered to Fair value through profit or loss a/c)

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326 430. At this date the equity of Unbound Ltd consisted of share capital of $225 000 and retained earnings of $90 000. All the identifiable asset and liabilities of Unbound Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair                                                                                                                                                    value Land $  60 000 $  67 500 Plant (cost $285 000) 225 000 247 500 Inventory     11 250 13 500...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326 430. At this date the equity of Unbound Ltd consisted of share capital of $225 000 and retained earnings of $90 000. All the identifiable asset and liabilities of Unbound Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair value Land $ 60 000 $ 67 500 Plant (cost $285 000) 225 000 247 500 Inventory 11 250 13...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326 430. At this date the equity of Unbound Ltd consisted of share capital of $225 000 and retained earnings of $90 000. All the identifiable asset and liabilities of Unbound Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair                                                                                                                                                    value Land $  60 000 $  67 500 Plant (cost $285 000) 225 000 247 500 Inventory     11 250 13 500...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326...
On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326 430. At this date the equity of Unbound Ltd consisted of share capital of $225 000 and retained earnings of $90 000. All the identifiable asset and liabilities of Unbound Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair                                                                                                                                                    value Land $  60 000 $  67 500 Plant (cost $285 000) 225 000 247 500 Inventory     11 250 13 500...
On 1 July 2019, Alpha Ltd acquired 80% of the shares (ex div.) of Beta Ltd...
On 1 July 2019, Alpha Ltd acquired 80% of the shares (ex div.) of Beta Ltd for $285 000. The NCI owns the remaining 20% of the shares in Beta Ltd. At this date the shareholders’ equity of Suburb Ltd consisted of: Share capital $150 000 Retained earnings 75 000 General reserve 60 000 At this date, all the identifiable assets and liabilities of Suburb Ltd were recorded at amounts equal to their fair values except for the following: Carrying...
In the year ended 30 June 2019, Jane Ltd acquired all of the issued shares of...
In the year ended 30 June 2019, Jane Ltd acquired all of the issued shares of Thomas Ltd for $231 300 on a-cum-div. basis. Information about the two companies at 1 July 2019 included the following. The equity of Thomas Ltd at 1 July 2019 consisted of $144 000 share capital and $36 000 retained earnings. Included in the assets and liabilities recorded by Thomas Ltd at 1 July 2019 were goodwill of $5400 and dividend payable of $4500. On...
Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7 000 000. At...
Mam Ltd acquired Bo Ltd on 1 July 2018 for cash of $7 000 000. At that date, Bo Ltd’s net identifiable assets had a fair value of $5 800 000. The fair value of the net identifiable assets of Bo Ltd are determined as follows: (in $000) Customer List 50 Machinery 1450 Buildings 1500 Land 3000 6000 Less: Bank Loan 200 Net assets 5800 At the end of the reporting period of 30 June 2019, the management of Mam...
On 1 July 2019, Adelaide Ltd acquired 75% of the issued shares of Canberra Ltd for...
On 1 July 2019, Adelaide Ltd acquired 75% of the issued shares of Canberra Ltd for $720,000. At this date, the equity of Canberra Ltd consisted of share capital of $400,000 and retained earnings of $210,000. All the identifiable assets and liabilities of Canberra Ltd were recorded at amounts equal to fair value except for the following. Carrying Amount Fair value Machine (cost $50,000)                      20,000          24,000 Plant (cost $400,000)        200,000       280,000 Inventories                      50,000          66,000...
On 1 July 2022, Dean Ltd acquired the remaining 80% of the issued shares of Lewis...
On 1 July 2022, Dean Ltd acquired the remaining 80% of the issued shares of Lewis Ltd for shares in Dean Ltd with a fair value of $1 000 000. At that date, the financial statements of Lewis Ltd showed the following information. All the assets and liabilities of Lewis Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50 000 below its fair value with a related accumulated depreciation...
On 1 July 2017, Max Ltd acquired 90% all the issued shares of Jay Ltd for...
On 1 July 2017, Max Ltd acquired 90% all the issued shares of Jay Ltd for $240 000. At this date the equity of Jay Ltd consisted of Share capital of $80 000, Retained earnings of $60 000, and General Reserve of $40 000. All the identifiable assets and liabilities of Jay Ltd were recorded at amounts equal to fair value. On 30/6/2019 the equity accounts consisted of Share capital of $80 000, Retained earnings of $70 000, and General...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT