Antara Ltd operates in the construction industry and do not prepare consolidated financialstatements. Laura Jones is the senior accountant of the company, leading the financialreporting team. As a result of being profitable for the last five years, on 1 July 2018, AntaraLtd acquired 25% of the issued ordinary shares of Blanca Ltd paying $198 000 in cash. Thisprovided Antara Ltd with the significant influence over Blanca Ltd.At the acquisition date, Laura and her team received the information below for Blanca Ltd:? Equity comprised $180 000 share capital and $144 000 retained earnings.? All identifiable assets and liabilities were recorded at their carrying amounts equal tothe fair values with the exceptions of three assets: Inventory, Land, and Equipment.Carrying Amount($)Fair Value($)Inventory 126 000 153 000Land 162 000 198 000Equipment 414 000 432 000Other information related to the above assets includes:? Blanca Ltd sold all the inventory by 30 June 2020.? After acquisition, Land was revalued by Blanca Ltd and revaluation was recognised inBlanca Ltd’s own accounting book. The company uses the revaluation model toaccount for its non-current assets. At 30 June 2019, Blanca Ltd had Land recorded at$252 000 fair value, and at 30 June 2020 at $288 000 fair value.? Blanca Ltd planned to use Equipment for another 5 years, using the straight linemethod of depreciation.During two financial years following the acquisition, Antara Ltd and Blanca Ltd carried out theinter-entity transactions below.? Antara Ltd sold a machine to Blanca Ltd for $85 000. The machine had a carrying amountof $79 600 at the time of sale on 1 January 2019. Blanca Ltd planned to use the machinefor a further 3-year with depreciation based on the straight line method.? On 15 May 2019, Antara Ltd sold inventory to Blanca Ltd for $20 800. The inventory hadcost Antara Ltd $10 000. Blanca Ltd sold half of the inventory externally by 30 June 2019.ACCT6005 Assessment 2 Case Study Brief Page 3 of 6? On 30 April 2020, Antara Ltd sold inventory to Blanca Ltd for $126 000. The profitbefore-tax of this transaction was $14 400. Blanca Ltd sold 90% of the inventoryexternally by 30 June 2020.Blanca Ltd’s balance of Retained earnings at 30 June 2019 was $306 000. Both companiesapply the tax rate of 30%.Laura approved the following consolidated statements of profit or loss and othercomprehensive incomes for Antara Ltd and Blanca Ltd for the year ended 30 June 2020. Shemade a note that the statement for Antara Ltd does not include the financial results of BlancaLtd prepared using the equity account method.Accounts Antara Ltd(consolidated)30 June 2020Blanca Ltd30 June 2020Revenues $900 000 $432 000Expenses 504 000 144 000Profit before tax 396 000 288 000Income tax expense (144 000) (90 000)Profit after tax 252 000 198 000Other comprehensive income (OCI) itemsGains on non-current asset revaluation 54 000 25 200Comprehensive income $306 000 $223 200For the financial year ended 30 June 2020, the Chief Financial Officer (CFO) of Antara Ltd hasbeen advised by the company’s auditor that the consolidated financial statements should beprepared, which include the financial results of Blanca Ltd based on the equity method. TheCFO came to Laura seeking her professional opinions regarding this matter.Laura has decided to ask you as a member of her reporting team to undertake a number oftasks to provide her with sufficient information before she responds to the CFO. The taskscomprise Part A and Part B below.Part A Practical Problem Solving (40 marks)a) Prepare the journal entries for Antara Ltd at 30 June 2020 to account for its investmentin Blanca Ltd, assuming Antara Ltd prepares consolidated financial statements.(25 marks)b) Prepare the consolidated statement of profit or loss and other comprehensiveincome for Antara Ltd for the year ended at 30 June 2020, assuming this statementincludes Blanca Ltd’s financial results. (15 marks)ACCT6005 Assessment 2 Case Study Brief Page 4 of 6Part B Recommendations (60 marks)Prepare a report explaining and making recommendations on the financial reporting issuesbelow.a) The impact of change to preparing consolidated financial statements on Antara Ltd’sdisclosure of financial information. (40 marks)Your response should include:? The differences between applying the equity method of accounting in AntaraLtd’s own accounting records, and applying the equity method of accountingin Antara Ltd’s consolidation worksheet.? The content of Antara Ltd’s relevant financial statement.? The extent of financial information available to Antara Ltd’s external users.? References to the financial information in Part A and relevant accountingstandards.b) Potential dividends paid by Blanca Ltd. This is because Blanca Ltd has been profitableand the company management plans to pay dividends to Antara Ltd.(20 marks)Your response should include:? How dividends paid by Blanca Ltd are accounted for using the equity methodof accounting.? How dividends are disclosed in Antara Ltd’s relevant financial statement.? References to the financial information in Part A and relevant accountingstandards.