Reference no: EM132995312

Question - On 1 July 2020, Simpson Ltd acquired 70 per cent of the share capital of Homer Ltd for $420,000. At acquisition date, the share capital and reserves were:

Share capital $350,000

Retained earnings $100,000

At the date of acquisition, all identifiable net assets of Homer Ltd were recorded at fair value.

During the year ended 30 Jun 2021, the following transactions occurred:

Property was required to be revalued on acquisition date. In the accounts of books of Homer Ltd, property was recorded at $950,000. Simpson Ltd had an independent valuation completed which confirmed the asset could be sold for $1,000,000.

On 1 July 2020, Homer Ltd sold plant to Simpson Ltd that cost $50,000 and had accumulated depreciation $20,000. The selling price of the plant was $40,000. At the date of sale, the plant could be depreciated straight line, 25% per year.

Pre-tax profit for 30 June 2021 is $100,000. During this year there were intragroup sales totalling $60,000 that had a cost price of $30,000. Homer Ltd had a quarter of this inventory still on hand at the end of this year.

A consultancy fee of $10,000 was paid by Homer Ltd to Simpson Ltd.

Homer Ltd paid a dividend of $15,000 during the year.

Ignore the tax implications of these transactions.

Required -

1. Prepare the consolidation journal entries for the above transactions

2. Calculate the non-controlling interests in profits for the year ended 30 June 2021 and prepare the elimination entry for the NCI.