ABC Ltd (ABC) sells wooden furniture. It has a 40 per cent interest in DEF Ltd (DEF), which sells timber. Financial information for each company for the year ending 30 June 2022 is as follows:

Abbreviated statements of profit or loss and other comprehensive income and reconciliations of opening and closing retained earnings

Additional information

• ABC buys its interest on 1 July 2021 after its due-diligence work finds no material adjustments to
  DEF’s accounts.
  DEF has issued no new capital since incorporation in 1997.
  DEF’s policy is to pay dividends out of current year profits first.
  ABC Ltd has a number of subsidiaries.
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REQUIRED

Assuming the existence of significant influence but not control, provide the necessary journal entries for ABC to equity-account for its interest in DEF.

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Sales Cost of goods sold Gross margin Other income Selling and distribution expenses Administration expenses Finance expenses Profit before tax Income tax expense Net profit after tax Opening retained earnings Total available for appropriation ABC ($) 3 265 000 1 288 500 (2 775 250) (1 030 800) 257 700 489 750 0 (58 300) (73 250) (37 650) 88 500 32 000 (91 830) (97 720) (51 270) 280 930 (33 500) 55 000 40 000 95 000 Dividends paid (80 000) Closing retained earnings 15 000 Page 1200Statements of financial position as at 30 June 2022 DEF ($) (99 307) 181 623 57 227 238 850 (100 000) 138 850