Question 1

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

Non-current assets:

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.

 

 

Question 2

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

  

Question 3

A substitution elimination recognises consolidation goodwill of $60 000 at control date 1 January 20X2. Goodwill impairment recognised in the following year is below:

                                            Goodwill Impairment:
20X2 20X3 20X4
5,000 22,000 2,000

 

Required:

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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