In: Accounting
Topic : Consolidation: Non-controlling interests
On 1 July 2016, Poppy Ltd acquired 80% of the issued shares of Sunshine Ltd for $240 000 when the equity of Sunshine Ltd consisted of:
share capital $160000
general reserve $10000
retained earnings $59000
At this date, all identifiable assets and liabilities of Sunshine Ltd were recorded at fair value except for the following.
carrying amount fair value
inventories $ 10000 $14 000
plant (cost $220 000) 90 000 99 000
land 70 000 87 000
Half of the inventories were sold by 30 June 2017 and the remainder by 30 June 2018. The plant has a further 3-year life beyond 1 July 2016, with benefits to be received evenly over this period. The land was sold on 1 March 2020 to an external party. Adjustments for the differences between carrying amounts and fair values are to be made in the consolidation worksheet. Poppy Ltd uses the partial goodwill method. The tax rate is 30%.
During the 4 years since acquisition, Sunshine Ltd has recorded the following annual results and declared the following dividends.
Year ended |
Profit (loss) |
Dividends |
$ |
$ |
|
30 June 2017 |
15,000 |
5,000 |
30 June 2018 |
20,000 |
10,000 |
Dividends were paid within 6 weeks of the end of each period. There have been no transfers to or from the general reserve since the acquisition date.
Required:
1. Prepare the consolidation worksheet entries as at 1 July 2016.
2. Prepare the consolidation worksheet entries for the year ended 30 June 2018.
Question 1 |
Max. marks allocated |
Acquisition analysis |
3 |
Consolidation entries for part (1) |
10 |
Consolidation entries for part (2) |
20 |
Presentation |
1 |
Total |
34 |
what is need to be done is mentioned in the required field and be able to explain the relationships that exist between a parent company and its subsidiary(ies), an investor and its investee;