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4 (10 marks) Continent Ltd acquired a 40% interest in Island Ltd in which it...

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Accounting

4 (10 marks) Continent Ltd acquired a 40% interest in Island Ltd in which it invested $170 000 on 1 July 2019. Continent Ltd has signed a joint venture agreement with the other investors in Island Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Island Ltd at the investment date and at 30 June 2020 were as follows: Share capital General reserve Asset revaluation surplus Retained earnings 1 July 2019 $300 000 30 June 2020 $300 000 100 000 15 000 100 000 109 000 At 1 July 2019, all the identifiable assets and liabilities of Island Ltd were recorded at amounts equal to their fair values. The following is applicable to Island Ltd for the year to 30 June 2020: (a) Profit (after income tax expense of $11 000): $39 000; (b) Increase in reserves: General (transferred from retained earnings): $15 000; Asset revaluation (revaluation of freehold land and buildings at 30 June 2020): $100 000; (c) Dividends paid to shareholders: $15 000. Continent Ltd does not prepare consolidated financial statements. Required: Prepare the journal entries in the records of Continent Ltd for the year ended 30 June 2020 in relation to its investment in the joint venture, Island Ltd

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