Violin Ltd acquired a 40% interest in Drum Ltd in which it invested $188,000 on 1 July 2015. Violin Ltd has signed a joint venture agreement with the…

Violin Ltd acquired a 40% interest in Drum Ltd in which it invested $188,000 on 1 July 2015. Violin Ltd has signed a joint venture agreement with the other investors in Drum Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Drum Ltd at the investment date and at 30 June 2016 were as follows:

 1 July 201530 June 2016Share capital$300,000$300,000Asset revaluation reserve-94,000General reserve-15,000Retained earnings100,000109,000At 1 July 2015, all the identifiable assets and liabilities of Drum Ltd were recorded at amounts equal to their fair values.

The following is applicable to Drum Ltd for the year to 30 June 2016:

  1. Profit (after income tax expense of $11,000): $38,800
  2. Increase in reservesGeneral (transferred from retained earnings): $15,000
  3. Asset revaluation (revaluation of freehold land and buildings at 30 June 2016): $94,000
  4. Dividends paid to shareholders: $15,000.

Violin Ltd does not prepare consolidated financial statements.

Required

Prepare the journal entries in the records of Violin Ltd for the year ended 30 June 2016 in relation to its investment in the joint venture, Drum Ltd.

Violin Ltd acquired a 40% interest in Drum Ltd in which it invested $188,000 on 1 July 2015. Violin Ltd has signed a joint venture agreement with the other investors inDrum Ltd providing joint control to all investors. The share capital, reserves and retained earnings of Drum Ltd at the investment date and at 30 June 2016 were as follows: Share capital $300,000 $300,000Asset revaluation reserve – 94,000General reserve – 15,000Retained earnings 100,000 109,000 At 1 July 2015, all the identifiable assets and liabilities of Drum Ltd were recorded at amounts equal to their fair values.The following is applicable to Drum Ltd for the year to 30 June 2016: a. Profit (after income tax expense of $11,000}: $38,0000. Increase in reserves 0 General (transferred from retained earnings}: $15,000 0 Asset revaluation (revaluation of freehold land and buildings at 30 June 2016): $94,000c. Dividends paid to shareholders: $15,000. Violin Ltd does not prepare consolidated financial statements. RequiredPrepare the journal entries in the reoords of Violin Ltd for the year ended 30 June 2016 in relation to its investment in the joint venture, Drum Ltd.

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