Super Retail Ltd (Super Retail) acquired 100% of the shares of New World Retail Ltd (New World Retail) on 1 July 2017. The cost of investment was $620 000. At that date the capital and reserves of New World Retail were:

Share capital    $260 000

Retained earnings $200 000


At the date of acquisition all assets of New World Retail were considered to be fairly valued, except for a plant that had a fair value $20 000 greater than its carrying amount. The cost of the plant was $100 000 and it had accumulated depreciation of $60 000. The plant had original estimated useful life of 10 years.


During financial year 01/07/2017-30/06/2018, New World Retail sold $30 000 in inventory to Super Retail for on-sale to external parties. The inventory had originally cost New World Retail $22,000. At the year end, Super Retail still had half of the inventory on hand. On-hand inventory was expected to be sold in the subsequent period. There were no other intro-group transactions between Super Retail and New World Retail for year ended 30 June 2018.


Super Retail incurred the following transactions with New World Retail during financial year 01/07/2018-30/06/2019:

  • Super Retail made total sales in inventory to New World Retail of $62 000, while New World Retail sold $65 000 in inventory to Super Retail. These inventories are expected to be sold to external parties.
  • The closing inventory in Super Retail includes inventory acquired from New World Retail at a cost of $36 000. This cost New World Retail $29 000 to purchase. New World Retail sold all inventory acquired from Super Retail to external parties during the year.
  • On 1 July 2018 Super Retail sold an machinery to New World Retail for $145 000 when its carrying amount in Super Retail’s accounts was $100 000 (initial cost $168 650, accumulated depreciation $68 650). This machinery is assessed as having a remaining useful life of 9 years.
  • New World Retail declared and paid dividend $100 000 on 30 June 2019.
  • Super Retail provided management consultation to New World Retail and this was the first time that Super Retail Ltd provided such service to New World Retail. At the end of 2019, New World Retail paid $8,000 for these services and has a balance of $1000 payable at year end.
  • New World Retail has a number of long-term loans, including a four-year loan for $50,000 from Super Retail. This loan was effective from 1 July 2018. Interest rate was 4% per annum. During the year ending 30 June 2019, New World Retail paid $1000 interest on this loan.


You were requested to prepare the followings:

  1. acquisition analysis and adjustment/elimination journal entries for consolidation at acquisition, 1 July 2017;
  2. adjustment/elimination journal entries for consolidation as at 30 June 2018, and adjustment/elimination journal entries for consolidation as at 30 June 2019.


After meeting with your supervisor you gathered the following information which you might need to complete your work:

  • Super Retail has the following accounting policies for the economic entity:
    • Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of any subsidiary;
    • Plant and machinery are depreciated using the straight-line method with no residual value. For part-years, depreciation is to be calculated on the number of months the asset is held in the relevant year.
    • All calculated amounts are to be rounded to the nearest whole dollar. Companies in the group do not show cents in any journals, worksheets, or financial statements.
  • Management team of Super Retail believes that goodwill acquired from business combination is impaired by $6 000 in the current financial year. Previous impairment of goodwill amounted to $4 000.
  • Super Retail declared dividend $200 000 and paid dividend $150 000 on 30 June 2019.
  • The company tax rate is currently 30% and this rate has not changed for a number of years.
  • Journal narrations are required.

Number each year consolidation elimination/adjusting journal entries by 1, 2, 3, …, etc;. Where more than one journal entry is needed for an event to be completely accounted for add the letters a,b,c,…etc to them as necessary.

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