Question 1

ABC Ltd was registered on 30 June 2019. The next day, the directors issued a prospectus inviting applicants for 400000 ordinary shares with an issue price of $2. The shares were payable in full on application. By 31 July, the company had received 500000 applications, together with the  application monies. The directors allotted 400000 shares on 1 August and returned the money for additional applications.


  1. Prepare general journal entries to record the above data.
  2. Enter the above data into ledgers.

Question 2

Jamuna River Ltd purchased a parcel of assets and liabilities comprising a business directly from Lyneham Pty Ltd. The parcel, measured at net fair values, consisted of:

 Balance of Accounts:      

Plant                                150,000

Land                                 240,000

Vehicles                           120,000

Accounts receivable        30,000

 Accounts payable            (48000)

       Total                                492000


Prepare journal entries to record the acquisition by Jamuna River Ltd, assuming that:

(i) The cost of acquisition was $600,000 cash.

(ii) The cost of acquisition was $432,000 cash.


Question 3

On 1 July 2018, Sunflower Ltd acquired 90% of the share capital to gain control of Palm Ltd.  The following intra-group transactions occurred during the year ending 30 June 2019.  Tax assumed 30%.

  1. During the 2018 – 2019 period, Sunflower Ltd sold inventory to Palm Ltd for $1600,000. Sunflower Ltd purchased this inventory at $1000,000. By 30 June 2019, Palm Ltd has sold 70% of that inventory to third party.
  2. Palm Ltd declared a final dividend of $1300, 000 from current year’s profits.
  3. Palm Ltd paid Sunflower Ltd, a fee for administrative services they provided of $40,000.
  4. Palm Ltd has an intra-group loan with Sunflower Ltd. Sunflower Ltd provided a loan of $10,000,000. The loan charges 4% interest annually. One half of the interest for the current year remains unpaid at 30 June 2019.  
  5. Palm Ltd sold a land to Sunflower Ltd for $560000. The land was purchased by Palm Ltd at $ 300000.  


  1. Prepare the journal entries required to eliminate the intra-group transactions above.   
  2. When are profits realised in relation to inventory transfers within the group?


Question 4

On 1st July, 2018 Nile Ltd Ltd acquired 70% of the share capital of Amazon Ltd for $80,000,000.

Equity of Amazon  Ltd at acquisition date was:


Share Capital                           $ 52,000,000

General Reserve                     $ 20,000,000

Retained Earnings                   $ 10,000,000


All assets of Amazon Ltd were recorded at fair value on acquisition, except for one property which had a fair value which was $2,000,000 lower than its carrying amount. The cost of the property was $20,000,000 with accumulated depreciation of $12,000,000. Ignore Taxes.


  1. Complete the worksheet below using the NET method.
  2. Prepare the consolidation adjustments and eliminations entries and recognise the NCI in the pre-acquisition equity of Amazon Ltd, assuming that the NCI was measured at the proportionate share of the acquiree’s identifiable net assets.

Elimination of Investment in Amazon  Ltd

Amazon  Ltd (S) $,000 Nile Ltd Ltd

(70% of Amazon ) (P) $,000

30% NCI


Fair Value of consideration transferred      
Less: FV of identifiable assets acquired & liabilities assumed      
Share capital on acquisition date 52,000    
General reserve-acquisition date 20,000    
Retained earnings-acquisition date 10,000    
Fair value adjustment      
Goodwill on acquisition      
Non-controlling interest      

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