Reference no: EM132560365
Question - Soran Ltd had the following balance sheet Soran Ltd Balance Sheet As at 31 Dec 20X7
Assets
Plant and equipment 500 000
Cash/other assets 300 000
Total net assets 800 000
Equities
Paid-up capital 700 000
Retained profits 100 000
Total equities 800 000
Soran Ltd purchased a 30 percent shareholding in Krall Ltd on 1 Jan 20X8 for $90,000. This purchase resulted in Soran having significant influence over Krall.
Soran owns 15 percent and had significant influence in Dukat Ltd for last six years.
Soran Ltd does not have any share investments that confer control.
On 1 January 20X8 Krall's assets were recorded at fair values and its owners' equity, totalling $190,000, was: share capital $150,000 and retained profits $40,000
During the 20X8 year Krall reported profit of $90,000 and revalued its assets upwards by $70,000.
Dividend that Krall paid out of current year profit amounted to $60,000.
During the 20X8 year, Dukat Ltd sold inventory to Krall and made profit of $90,000. Half of this inventory was still held by Krall Ltd by year-end.
Required - Prepare journal entries for Soran Ltd to record all events in 20X8 for its investment in Krall Ltd. Use Australian Accounting Standards but classify income from associates in a way that would provide appropriate information regarding prudent distribution of cash flows. Use the separate recognition method.