Cena Ltd purchased 75% of the capital of Lesnar Ltd for $250 000 on 1 July 2003. At this date the equity of Lesnar Ltd was:
|Share capital||$ 100 000|
|General reserve||60 000|
|Retained earnings||40 000|
At this date, Lesnar Ltd had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the following assets:
|Carrying amount||Fair value|
|Inventory||$ 70 000||$ 100 000|
|Plant (cost $170 000)||150 000||190 000|
|Land||50 000||100 000|
The plant has a remaining useful life of 10 years. As a result of an impairment test, all goodwill was written off in 2006. All the inventory on hand at 1 July 2003 was sold by 30 June 2004. Differences between carrying amounts and fair values are recognised on consolidation. The tax rate is 30%.
During the 2003-2004 period, Lesnar Ltd sold a quantity of inventory to Cena Ltd for $10 000. The original cost of these items to Lesnar Ltd was $7000. One-third of this inventory was still on hand at the end of the year.
On 1 January 2004, Lesnar Ltd transferred an item of plant with a carrying amount of $15000 to Cena Ltd for $20 000. Cena Ltd treated this item as inventory. The item was still on hand at the end of the year. Lesnar Ltd applied a 20% depreciation rate to this type of plant.
The trial balances of Cena Ltd and Lesnar Ltd at 30 June 2009 are:
|Cena Ltd||Lesnar Ltd|
|Shares in Lesnar Ltd||$ 250 000|
|Plant||425 500||$ 190 000|
|Land||110 000||50 000|
|Current assets||162 000||84 000|
|Cost of sales||225 000||35 000|
|Other expenses||65 000||7 000|
|Income tax expense||50 000||5 000|
|Share capital||$ 400 000||$ 100 000|
|General reserve||60 000||80 000|
|Retained earnings (1/7/08)||120 000||75 000|
|Sales revenue||510 600||80 000|
|Payables||72 900||12 000|
|124 000||24 000|
|$1 287 500||$371 000|
Prepare the consolidation worksheet journal entries for Cena Ltd at 30 June 2004. Assume a profit for Lesnar Ltd for the 2003-04 period of $40 000.
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