Mop Ltd Acquired a 40 Per Cent Interest in Bucket

question 6

Multiple Choice

Mop Ltd acquired a 40 per cent interest in Bucket Ltd on 1 July 2014 for a cash consideration of $824 000.Bucket Ltd's assets and liabilities were recorded at fair value at the time of purchase and were represented by equity as follows: $$\begin{array} { | l | r | } \hline \text { Share capital } & 1580000 \\\hline \text { Retained earnings } & \underline { 480000 } \\\hline \text { Total shareholders' funds } & \underline { 2060000 } \\\hline\end{array}$$ Additional information relating to the period ended 30 June 2015:
Bucket Ltd had an after-tax profit of $665 000.
Bucket Ltd proposed a dividend out of pre-acquisition profits of $90 000.
Later in the period Bucket Ltd paid the $90 000 dividend and declared a further $100 000 dividend out of post-acquisition profits.This dividend will not be paid until the following period.
Mop Ltd accrues the dividends of associates as revenue when they are proposed.The investment has been recorded in Mop's books in accordance with the cost method.What consolidation journal entries are required to apply the equity accounting method for the period ended 30 June 2015?

• A)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Investment in Bucket Ltd } & 824000 & \\
• \hline \mathrm { Cr } & \text { Cash } & & 824000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend receivable } & 36000 & \\
• \hline \mathrm { Cr } & \text { Investment in Bucket Ltd } & & 36000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Investment in Bucket Ltd } & 266000 & \\
• \hline \mathrm { Cr } & \text { Share of associate's profit } & & 266000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend receivable } & 40000 & \\
• \hline \mathrm { Cr } & \text { Investment in Bucket Ltd } & & 40000 \\
• \hline
• \end{array}\]
• B)
• \[\begin{array} { | c | l | r | r | }
• \hline \mathrm { Dr } & \text { Investment in Bucket Ltd } & 266000 & \\
• \hline \mathrm { Cr } & \text { Share of associate's profit } & & 266000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend revenue } & 40000 & \\
• \hline \mathrm { Cr } & \text { Investment in Bucket Ltd } & & 40000 \\
• \hline
• \end{array}\]
• C)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Investment in Bucket Ltd } & 824000 & \\
• \hline \mathrm { Cr } & \text { Share capital } & & 632000 \\
• \hline \mathrm { Cr } & \text { Retained earnings } & & 192000 \\
• \hline\\
• \hline \mathrm { Dr } & \text { Dividend receivable } &36000 & \\
• \hline \mathrm { Cr } & \text { Investment in Bucket Ltd } & & 36000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend receivable } &40000 & \\
• \hline \mathrm { Cr } & \text { Dividend revenue } & & 40000 \\
• \hline
• \end{array}\]
• D)
• \[\begin{array} { | l | l | r | r | }
• \hline \mathrm { Dr } & \text { Investment in Bucket Ltd } & 824000 & \\
• \hline \mathrm { Cr } & \text { Share capital } & & 632000 \\
• \hline \mathrm { Cr } & \text { Retained earnings } & & 192000 \\
• \hline\\
• \hline \mathrm { Dr } & \text { Dividend revenue } &36000 & \\
• \hline \mathrm { Cr } & \text { Investment in Bucket Ltd } & &36000 \\
• \hline & & & \\
• \hline \mathrm { Dr } & \text { Dividend revenue } & 40000 & \\
• \hline \mathrm { Cr } & \text { Dividend receivable } & & 40000 \\
• \hline
• \end{array}\]

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