Reference no: EM133110003

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.

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.

Goodwill has been determined to have been impaired by $12,000.

There were no other inter-company transactions. The tax rate is 30%.

Required -

1. Prepare the acquisition analysis.

2. Prepare the consolidation journal entries for the above transactions. Assume the full-goodwill method.

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