Reference no: EM133014960
Question - Consolidated Financial Statements - Non-controlling Interests - On 1 July 2019, Pink Ltd acquired 80% of the issued shares of Purple Ltd for $200,000. At this date, the equity of Purple Ltd was:
Share capital $120,000
General reserve 10,000
Retained earnings 60,000
At acquisition date, all the identifiable assets and liabilities of Purple Ltd were recorded at amounts equal to fair value, except for:
Carrying amount Fair value
Equipment (cost $80,000) $40,000 $70,000
At 30 June 2020, the equity of Purple Ltd consisted of: Share capital $120,000
General reserve 15,000
Retained earnings 72,000
Additional information: The re-valued equipment was still held at 30 June 2021, being depreciated on the straight-line basis over 5 years.
During the year ended 30 June 2021 Purple Ltd transferred $5,000 from retained earnings to the general reserve. Any movements in the general reserve are from post-acquisition earnings.
For the year ended 30 June 2021, Purple Ltd recorded a profit of $32,000 and paid a dividend of $10,000.
During the year ended 30 June 2021 Purple Ltd sold inventory to Pink Ltd for $14,000, recording a profit before tax of $4,000. By 30 June 2021, 30% of the inventory remained unsold by Pink Ltd.
The tax rate is 30%.
Required -
1. Prepare an acquisition analysis as at date of acquisition using the partial goodwill method.
2. Prepare all journal entries required for consolidation purposes at 30 June 2021.
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