Reference no: EM132480571
On 30 June 2016, P Ltd purchased 90% of the shares of S Ltd for $1,215,000 cash.
At the date of acquisition, S Ltd's statement of financial position was as follows:
Statement of Financial Position of S Ltd as at 30 June 2016
Assets Liabilities
Cash 83,000 Accounts Payable 128,000
Accounts Receivable 78,000 Bank Loans 532,000
Inventory 169,000 Deferred Tax Liability 45,000
Land 460,000
Buildings 960,000 Equity
(Accumulated Depreciation) (224,000) Share Capital 650,000
Plant & Equipment 340,000 Revaluation Surplus 105,000
(Accumulated Depreciation) (136,000) Retained Profits 30/6/2016 270,000
Total Assets 1,730,000 Total Equities 1,730,000
Additional Information
a) On 30 June 2016, all the identifiable net assets of S Ltd were considered to be recorded at fair value in S Ltd's statement of financial position, except land, which had a fair value of $560,000. The land has not been revalued in S Ltd's accounts.
b) P Ltd has a policy of valuing Non-Controlling Interest at Fair Value at acquisition date.
c) On 30 June 2018, the recoverable amount of goodwill, relating to the purchase of S Ltd by P Ltd, was assessed to be $220,000.
d) During the 2018-2019 financial year, P Ltd provided management services to S Ltd for $36,000.
e) On 1 December 2018, S Ltd leased surplus office space in its building to P Ltd, at a rental of $18,000 per month. Rent is payable half-yearly in advance, on 1 December and 1 June each year.
f) During the 2018-2019 financial year, P Ltd sold goods to S Ltd for $520,000. These goods had originally cost P Ltd $430,000. On 30 June 2019, 20% of these goods remained in S Ltd's closing inventory.
g) On 30 June 2019, S Ltd still owed P Ltd $53,000 for inventory purchases.
h) P Ltd's opening inventory includes goods purchased from S Ltd for $218,000. These goods had originally cost S Ltd $178,000.
i) On 1 July 2018, S Ltd sold its existing plant and equipment to P Ltd for $200,000. S Ltd had originally purchased the plant and equipment for $340,000, on 1 July 2012. The original estimated useful life of the plant and equipment was 10 years.
j) The company income tax rate is 30%.
Statements of Profit or Loss of P Ltd and S Ltd for the year ended 30 June 2019
P Ltd S Ltd
Sales 3,547,000 1,583,000
Cost of Goods Sold 2,392,000 1,033,000
Gross Profit 1,155,000 550,000
Depreciation Expense 150,000 84,000
Borrowing Costs Expense 107,000 38,000
Administration Expenses 744,500 458,000
Management Fees Revenue 36,000 -
Rental Revenue - 126,000
Dividend Revenue 40,500 -
Gain on Sale of Plant and Equipment - 64,000
Profit before Income Tax Expense 230,000 160,000
Income Tax Expense 69,000 48,000
Profit after Income Tax Expense 161,000 112,000
Statements of Changes in Equity of P Ltd and S Ltd for the year ended 30 June 2019 [Extract]
P Ltd S Ltd
Retained Profits 1/7/18 720,000 343,000
Profit after Income Tax Expense 161,000 112,000
Interim Dividend Paid 42,000 20,000
Final Dividend Declared 47,000 25,000
Retained Profits 30/6/19 792,000 410,000
Statements of Financial Position of P Ltd and S Ltd as at 30 June 2019
P Ltd S Ltd
Assets
Cash 83,500 41,000
Accounts Receivable 264,000 132,000
Dividends Receivable 22,500 -
Prepaid Rental Expense 90,000 -
Inventory 381,000 194,000
Land 990,000 460,000
Buildings 1,680,000 960,000
Accumulated Depreciation (392,000) (320,000)
Plant and Equipment 640,000 520,000
Accumulated Depreciation (226,000) (52,000)
Investment in S Ltd 1,215,000 -
Total Assets 4,748,000 1,935,000
Liabilities
Accounts Payable 206,000 89,000
Dividends Payable 47,000 25,000
Unearned Rental Revenue - 90,000
Bank Loans 1,863,000 521,000
Deferred Tax Liabilities 114,000 45,000
Equity
Share Capital 1,460,000 650,000
Revaluation Surplus 266,000 105,000
Retained Profits 30/6/19 792,000 410,000
Total Equities 4,748,000 1,935,000
Required:
Question 1: Prepare the Consolidation Worksheet Journal entries for the financial year ended 30 June 2019, including the consolidation journal entries recognising the non-controlling interest.