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Prepare consolidation journal entry that large ltd will need

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Reference no: EM132920660

Large Ltd owns 100% of the shares of Small Ltd. These shares were acquired on 1 July 2019 for $1 million when the shareholders' funds of Small Ltd were:

Share capital                  $500,000
Retained earnings            $400,000
                                   $900,000

  • All assets of Small Ltd were fairly stated at acquisition date, except for a land that had a fair value $50000 more than carrying value.
  • During the 2019/2020 financial year, Small Ltd sold inventory to Large Ltd at a sales price of $200,000. The inventory cost Small Ltd $120,000 to produce. At 30 June 2010 half of the stock was still on hand with Large Ltd. In addition, Small Ltd paid an interim dividend of $40,000 out of post-acquisition profits to Large Ltd during the 2009/2010 financial year. The tax rate is 30%.

Problem 1: Based on the above information, prepare the consolidation journal entries that Large Ltd will need to pass on 30 June 2020.

Reference no: EM132920660

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