Question 1
| Consolidation | Parent Ltd | Subsidiary Ltd | DR | CR | Consolidated |
| Sales | 700,000 | 500,000 | |||
| Dividend income | 2,000 | 0 | |||
| Expenses | 290,000 | 260,000 | |||
| Profit | 412,000 | 240,000 | |||
| Retained earnings 1 July 2015 | 300,000 | 250,000 | |||
| Less Dividend declared | -1,000 | -2,000 | |||
| Retained earnings 30 June 2016 | 711,000 | 488,000 | |||
| Share capital | 1,000,000 | 600,000 | |||
| General reserve | 200,000 | 0 | |||
| Trade and other creditors | 530,000 | 208,000 | |||
| Dividend payable | 1,000 | 2,000 | |||
| Income tax payable | 140,000 | 42,000 | |||
| 2,582,000 | 1,340,000 | ||||
| Trade and other receivables | 643,000 | 508,000 | |||
| Dividend receivable | 2,000 | 0 | |||
| Shares in Subsidiary Ltd | 900,000 | – | |||
| Property plant and equipment (net) | 730,000 | 710,000 | |||
| Inventories | 200,000 | 20,000 | |||
| Other assets | 107,000 | 102,000 | |||
| Goodwill on consolidation | |||||
| 2,582,000 | 1,340,000 |
Parent Ltd paid for subsidiary’s equity for $900,000
Question 2
| Consolidation | Parent Ltd | Subsidiary Ltd | DR | CR | Consolidated |
| Sales | 15,000 | 16,500 | |||
| Dividend income | 60 | 0 | |||
| Expenses | -5,140 | -5,685 | |||
| Profit | 9,920 | 10,815 | |||
| Retained earnings 1 July 2015 | 6,000 | 5,000 | |||
| Less Dividend declared | -120 | -60 | |||
| Retained earnings 30 June 2016 | 15,800 | 15,755 | |||
| Share capital | 40,000 | 10,000 | |||
| General reserve | 60,000 | 3,000 | |||
| Loan payable | 5,000 | 3,500 | |||
| Dividend payable | 120 | 60 | |||
| 120,920 | 32,315 | ||||
| Trade and other receivables | 4,000 | 3,700 | |||
| Dividend receivable | 60 | 0 | |||
| Shares in Subsidiary Ltd | 20,000 | – | |||
| Property plant and equipment (net) | 70,000 | 21,000 | |||
| Inventories | 18,750 | 7,115 | |||
| Other assets | 8,110 | 500 | |||
| Goodwill on consolidation | |||||
| 120,920 | 32,315 |
Parent Ltd paid for subsidiary’s equity for $20,000
Question 3
Parent Ltd acquired 100% of the issue shares of Subsidiary Pty Ltd for $430,000 paid in cash.
Date of acquisition: 1 July 2015. At this date Subsidiary Ltd reported the following shareholder’s equity:
Share capital 120,000
Retained earnings 50,000
General reserve 10,000
180,000
Parent group adopts the cost model. Carrying amounts and fair value of assets and liabilities of Subsidiary Ltd are as follows:
| Carrying amount ($) | Fair value ($) | |
| Equipment | 14,000 | 20,000 |
| Less accumulated depreciation | (6,000) | 0 |
Other information:
- At acquisition date the equipment was 3 years old and it’s original useful life at the time of purchase is 7 years.
- The annual impairment test assessed the recoverable amount of Parent Ltd’s goodwill was impaired by $4,000 on 30 June 2017
Required:
- Prepare the acquisition analysis on 1/7/2015
- Prepare the consolidation entries 1/7/2015
- Prepare the consolidation entries 30/6/2017
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