I mentioned two questions in a row because they depend in each other for the solution ....

Question one: on the 1 July 2013, Alma Ltd purchased 40% of the shares of Liverpool Ltd for $ 70000, at this date the equity of Liverpool Ltd consisted of:

Share capital	$150000
Retained earnings	$ 80000

Retained earnings at 1 July 2014 was $ 110000.

At this date, all identifiable assets and liabilities of Chelsea Ltd were recorded at fair value except for:

Item	Carrying value	Fair value
Inventory	$ 10000	$ 20000
Plant	$ 25000	$ 50000

The inventory was all sold by 30 June, 2014. The plant had a future expected useful life of 5 years.

Additional information:

1. In September, 2013, Liverpool Ltd sold inventory to Alma Ltd for $16000, this inventory had previously cost Liverpool Ltd $10000. Half of this inventory was sold by Alma Ltd at the during 2015.
2. In February 2015, Alma Ltd sold inventory to Liverpool Ltd with a profit before tax of $12000. Only one third of this inventory was sold by Liverpool Ltd to external party during June, 2015.
3. In September 2013, Liverpool Ltd sold inventory to Alma Ltd for $ 20000, it was cost Liverpool Ltd $ 10000. Half of this inventory remained unsold at 30 June 2014. However, half of remaining items of inventory was sold by Alma to external party before 30 June 2015.
4. On 1 July, 2013, Alma Ltd sold an item of Machinery to Liverpool Ltd for $80000. This item had cost Alma Ltd $ 60000. This item ha d a future 7 years life. The machinnary was sold to external party at the first of januart,2015.
5. On 1 January, 2013, Liverpool Ltd sold plant to Alma Ltd for $79000. This item had cost Liverpool Ltd $ 65000. This item had a future 4 years life. The plant was sold by Alma to SCCOTCH Power .Co at the 1, of April for $80000.

6. Tax rate 30%
7. Dividend declared and paid during 2015 was $ 14000.
8. Profit at 30 June 2015 was $65000
9. Assets revaluation surplus of Chelsea Ltd at 30 June 2015 was $4000. Whereas it was zero at 30 June 2014.
10. There is no transfer to general reserves during 2013 to 2015

Required:

Record the necessary entries at Sophia Account at the 30^th of June 2015 using the equity method assuming that Sophia Ltd is a Parent company.

Question two: use the information provided in question one alongside the provided information below, to record the journal entries for the given years.

Profit and dividends for the year ended 30^th of June 2013 to 2017 were as follows:

Year	Profit/( loss) $	Dividends $	OCI	Transfer to general reserves
2016	(300000)	40000	14000	5000
2017	(80000)	20000	4000	5000
2018	110000	10000	9000	0
2019	300000	50000	24000	0

Retained earnings were as follows:

Year	Beginning 1/7/2015	Ending 30/6/2016
2016	161000	(184000)
2017	(184000)	(289000)
2018	(289000)	(189000)
2019	(189000)	61000

Other information

1. In September, 2016, Liverpool Ltd sold inventory to Alma Ltd with a profit before tax of $ 20000. One-third of this inventory was sold by Alma Ltd at Augest, 2017, and the rest was sold at September, 2018.
2. In February 2018, Alma Ltd sold inventory to Liverpool Ltd with a profit After tax of $14000. Only half of this inventory was sold by Liverpool Ltd to external party during June, 2018. The rest were sold during 2019.
3. In September 2018, Liverpool Ltd sold inventory to Alma Ltd for $ 20000, it was cost Liverpool Ltd $ 5000. this inventory remained unsold at 30 June 2019.
4. On 1 July, 2017, Alma Ltd sold an item of Machinery to Liverpool Ltd with a profit before tax of $30000 This item had a future 10 years life. The machinery was sold to external party at the 30^th of March,2019.During 2017, the Liverpool started to use double declining balance method to depreciate its PPE.

Required

Prepare journal entries in the records of Sarah Ltd for each of the years ended 30 June 2016 to 2019 in relation to its investment in the associate/joint venture, Madison Ltd. (Assume Liverpool prepare consolidated financial statements.)