Redcliff Ltd acquired the entire share capital of ABC Ltd for $18,000 cash on 31 December 20X4. The balance sheets of the two companies as at that date were as follows:
Redcliff ltd. ABC. Ltd
$ $ $
Current assets 240,000 28,800
Investments in ABC at cost 18,000
Other assets 96,000 114,000 9,600
Total assets 354,000 38,400
Current liabilities 198,000 20,400
Net assets 156,000 18,000
paid up capital 120,000 12,000
retained profits 36,000 6,000
owners. Equity 156,000 18,000
Prepare the consolidated balance sheet of Redcliff Ltd and its subsidiary as at 31 December 20X4.
Based on the information provided below, prepare appropriate consolidation journal entries for possible account adjustment or elimination.
Parent paid $110 000 on 30 June for all the shares of Subsidiary, whose equity at that date is share capital $72 000 and retained profits $28 000. However, the assets of Subsidiary are not all recorded at their fair value. Assume that all companies adopt the revaluation model under AASB 116. The discrepancies are:
Carrying Amount Fair Value
Investments. 26 000 54,000
Accounts receivable 14,000 8,000
PPE 26,000 12,000
Inventory 70,000 76,000
Franchise nil 10,000
A substitution elimination recognises consolidation goodwill of $60 000 at control date 1 January 20X2. Goodwill impairment recognised in the following year is below:
a) Record the eliminations for goodwill and its impairment at 31 December 20X2, 20X3 and 20X4 into general journal.
b) Record the eliminations of the goodwill and its impairment, if any, that are necessary 10 years after the control date, assuming no further impairment has been recognized.
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