Blupa Ltd acquired a 25% interest in Trinity Ltd for $145,000 on 1 July 2020. At that date, shareholders’ equity of Trinity Ltd consisted of:

	$
Share Capital	280,000
Retained Earnings	86,000

All identifiable assets and liabilities of Trinity Ltd were recorded at fair value except for the machinery which was recorded at $25 000 below its fair value on 1 July 2020. Machinery is depreciated at 25% straight line.

Information about income and changes in equity for Trinity Ltd for the year ended 30 June 2021 is as follows:

	Trinity Ltd
	$
Revenue	260,000
Expenses	120,000
Profit before income tax	140,000
Income tax expense	28,000
Profit for the period	112,000
Retained earnings (1/7/20)	86,000
	198,000
Dividend paid	12,000
Dividend declared	35,000
	47,000
Retained earnings (30/6/21)	151,000

Additional information:

• On 1 January 2021, Trinity Ltd sold Blupa Ltd equipment for $48,000. The equipment had originally cost Trinity Ltd $65,000 and had a carrying amount of $42,000 at the time of sale to Blupa Ltd. Both companies depreciate equipment at the rate of 10% per annum on cost.
• During the year ended 30 June 2021, Trinity Ltd sold inventory to Blupa Ltd for $24,000. The cost of this inventory to Trinity Ltd was $21,500. Half of this inventory is still on hand at the end of the year.
• Blupa Ltd regards Trinity Ltd as an ‘associate’ company.
• The tax rate is 30%.

Required:

Prepare the journal entries required by Blupa Ltd relating to its Investment in Trinity Ltd and subsequent transactions for the period from 1 July 2020 to 30 June 2021 assuming Blupa Ltd prepares consolidated financial statements.

Answer rating: 100% (QA)

A 1 Date Particulars Debit Credit 2 44013 Investme... View the full answer