In: Accounting
On 1st July 20X7 Parent Ltd acquired all of the share capital of Controlled Ltd for $487,500.
As that date equity of Controlled Ltd was:
Share Capital $300,000
General Reserve $60,000
Retained Earnings $70,000
Consolidation worksheet 30 June 20X2 |
Dr./Cr |
Parent Ltd |
Controlled Ltd |
Elimination |
Consolidated Statement |
|
Dr |
Cr |
|||||
Sales |
Cr |
4,000,000 |
2,200,000 |
|||
Cost of goods sold |
Dr |
2,300,000 |
1,000,000 |
|||
Gross profit |
Cr |
1,700,000 |
1,200,000 |
|||
Dividend from Controlled Ltd |
Cr |
30,000 |
||||
Profit from sale of plant |
Cr |
6,000 |
||||
Interest from Controlled Ltd |
Cr |
11,000 |
||||
1,741,000 |
1,206,000 |
|||||
Selling expenses |
Dr |
121,500 |
86,000 |
|||
Administrative expenses |
Dr |
400,000 |
250,000 |
|||
Financial expenses |
Dr |
362,000 |
220,000 |
|||
Profit before tax |
Cr |
857,500 |
650,000 |
|||
Less: Income tax |
Dr |
340,000 |
260,000 |
|||
Profit |
Cr |
517,500 |
390,000 |
|||
Retained earnings 1-07-20X8 |
Cr |
400,000 |
250,000 |
|||
Available |
917,500 |
640,000 |
||||
Less Appropriation: |
||||||
Interim dividend paid |
Dr |
60,000 |
30,000 |
|||
Declared dividend |
Dr |
90,000 |
45,000 |
|||
To General reserve |
Dr |
5,000 |
||||
Total appropriation |
Dr |
150,000 |
80,000 |
|||
Retained earnings 30-06-20X9 |
Cr |
767,500 |
560,000 |
|||
Share capital |
Cr |
600,000 |
300,000 |
|||
General reserve |
Cr |
240,000 |
100,000 |
|||
Dividend payable |
Cr |
90,000 |
45,000 |
|||
Current tax payable |
Cr |
340,000 |
260,000 |
|||
Payable |
Cr |
112,500 |
25,000 |
|||
Non-current liabilities |
Cr |
200,000 |
60,000 |
|||
2,350,000 |
1,350,000 |
|||||
Land and building |
Dr |
450,000 |
250,000 |
|||
Motor vehicle (net) |
Dr |
130,000 |
60,000 |
|||
Plant and equipment (net) |
Dr |
500,000 |
400,000 |
|||
Investment in Controlled Ltd |
Dr |
457,500 |
- |
|||
Receivable |
Dr |
200,000 |
300,000 |
|||
Inventory |
Dr |
300,000 |
150,000 |
|||
Bank |
Dr |
312,500 |
190,000 |
|||
Goodwill on consolidation |
Dr |
- |
- |
|||
Accumulated impairment-goodwill |
Dr |
- |
- |
|||
2,350,000 |
1,350,000 |
Additional Information:
- Sales by Controlled Ltd to Parent Ltd were $60,000
- Unrealized profit in the opening inventory of Controlled Ltd for goods sold by Parent Ltd was $2,000.
- Unrealized profit in the closing inventory of Parent Ltd for goods sold by Controlled Ltd was $4,000
- On 1st July, 20X8 Controlled Ltd sold plant to Parent Ltd for $60,000. At the date of sale the plant had a written-down value of $54,000. Parent Ltd depreciates plant at 10% per annum on cost using the straight-line method.
- Impairment of goodwill:
Year ended 30 June 20X8 $5,500
Year ended 30 June 20X9 $5,500
Required: For year ended 30 June, 20X9
a. Consolidation journal entries
b. The consolidation worksheet, and
c. Consolidated financial statement
Income statement. |
|||||||
Consolidation worksheet 30 June 20X2 |
Dr./Cr |
Parent |
Controlled Ltd |
Elimination |
Consolidated Statement |
Remarks |
|
Ltd |
|||||||
Income |
|||||||
Sales |
Cr |
40,00,000 |
22,00,000 |
-66000 |
61,34,000 |
Adjustment 4 |
|
Cost of goods sold |
Dr |
23,00,000 |
10,00,000 |
-62000 |
32,38,000 |
Adjustment 4 |
|
Gross profit |
Cr |
17,00,000 |
12,00,000 |
28,96,000 |
4,000 |
||
Other Income |
|||||||
Dividend from Controlled Ltd |
Cr |
30,000 |
-30000 |
- |
Adjustment 1 |
||
Profit from sale of plant |
Cr |
6,000 |
-6000 |
- |
Adjustment 2 |
||
Interest from Controlled Ltd |
Cr |
11,000 |
-11000 |
- |
Adjustment 3 |
||
Total |
17,41,000 |
12,06,000 |
28,96,000 |
||||
Expenses |
|||||||
Selling expenses |
Dr |
1,21,500 |
86,000 |
2,07,500 |
|||
Administrative expenses |
Dr |
4,00,000 |
2,50,000 |
6,50,000 |
|||
Financial expenses |
Dr |
3,62,000 |
2,20,000 |
-600 |
-11000 |
5,70,400 |
Adjustment 3 & 2 |
Profit before tax |
Cr |
8,57,500 |
6,50,000 |
14,68,100 |
|||
Less: Income tax |
Dr |
3,40,000 |
2,60,000 |
6,00,000 |
|||
Profit |
Cr |
5,17,500 |
3,90,000 |
8,68,100 |
|||
Retained earnings 1-07-20X8 |
Cr |
4,00,000 |
2,50,000 |
6,50,000 |
|||
Available |
9,17,500 |
6,40,000 |
15,18,100 |
||||
Less Appropriation: |
|||||||
Interim dividend paid |
Dr |
60,000 |
30,000 |
-30000 |
60,000 |
Adjustment 1 |
|
Declared dividend |
Dr |
90,000 |
45,000 |
1,35,000 |
|||
To General reserve |
Dr |
5,000 |
5,000 |
||||
Total appropriation |
Dr |
1,50,000 |
80,000 |
2,00,000 |
|||
Retained earnings 30-06-20X9 |
Cr |
7,67,500 |
5,60,000 |
0 |
0 |
13,18,100 |
|
Balance Sheet |
|||||||
Share capital |
Cr |
6,00,000 |
3,00,000 |
-300000 |
6,00,000 |
||
General reserve |
Cr |
2,40,000 |
1,00,000 |
-100000 |
2,40,000 |
||
Retained Earning |
7,67,500 |
5,60,000 |
0 |
13,18,100 |
|||
Dividend payable |
Cr |
90,000 |
45,000 |
1,35,000 |
|||
Current tax payable |
Cr |
3,40,000 |
2,60,000 |
6,00,000 |
|||
Payable |
Cr |
1,12,500 |
25,000 |
1,37,500 |
|||
Non-current liabilities |
Cr |
2,00,000 |
60,000 |
2,60,000 |
|||
23,50,000 |
13,50,000 |
32,90,600 |
|||||
Land and building |
Dr |
4,50,000 |
2,50,000 |
7,00,000 |
|||
Motor vehicle (net) |
Dr |
1,30,000 |
60,000 |
1,90,000 |
|||
Plant and equipment (net) |
Dr |
5,00,000 |
4,00,000 |
-5400 |
8,94,600 |
Adjustment 2 |
|
Investment in Controlled Ltd |
Dr |
4,57,500 |
0 |
-457500 |
0 |
||
Receivable |
Dr |
2,00,000 |
3,00,000 |
5,00,000 |
|||
Inventory |
Dr |
3,00,000 |
1,50,000 |
53500 |
5,03,500 |
Adjustment of Unrealised profit in Closing Stock |
|
Bank |
Dr |
3,12,500 |
1,90,000 |
5,02,500 |
|||
Goodwill on consolidation |
Dr |
0 |
0 |
0 |
|||
Accumulated impairment-goodwill |
Dr |
0 |
0 |
0 |
|||
23,50,000 |
13,50,000 |
32,90,600 |
|||||
0 |
0 |
0 |
|||||
Depreciation on Excess cost of plant |
|||||||
01-07-2018 |
Date of sale |
||||||
30-06-2019 |
Reporting date |
||||||
10% |
Depreciation Rate |
||||||
6000 |
Depreciation Claim by Parent during the year. |
||||||
6000 |
Profit on sale |
||||||
54000 |
Actual Cost |
||||||
5400 |
Actual Depreciation |
54000X10% |
|||||
600 |
Excess Claim |
6000-5400 |
|||||
Entries for Adjustment. |
|||||||
Adjustment 1. |
|||||||
Dividend Income Amount $30,000 |
|||||||
Dividend Income (parent) Dr |
30,000 |
||||||
To Interim Divident (controlled ltd) |
30,000 |
||||||
Adjustment 2. |
|||||||
Interest Income Amount $11,000 |
|||||||
Interest Income (parent) Dr |
11,000 |
||||||
To Finance Exp (controlled ltd) |
11,000 |
||||||
Adjustment 3. |
|||||||
Profit on Sale of Plant $6,000 |
|||||||
Profit on sale of Plant (Controlled) Dr |
6,000 |
||||||
To Plant & Mach |
5,400 |
||||||
To Depreciation |
600 |
||||||
Adjustment 4. |
|||||||
Sale to Parent Company |
|||||||
Sale Account (controlled) Dr |
60,000 |
||||||
To Cost of Good Sold |
60,000 |
||||||
Adjustment 5. |
|||||||
Adjustment of Unrealised Profit in Stock |
|||||||
Sale Dr (controlled) |
4,000 |
||||||
To Closing Stock (parent) |
4,000 |
||||||
Sale Dr (controlled) |
2,000 |
||||||
To Cost of Good Sold (Parent) |
2,000 |