Reference no: EM131573299

Question - On 1st July 2004 Super Limited acquired a hundred percent of the share capital of Minor Limited for a purchase consideration of $3,500,000. On the day of acquisition the shareholder equity of Minor Limited consists of:

Contributed Capital: $1,900,000

Retained Earnings: $800,000

Revaluation reserve: $740,000

All assets of Minor Limited were fairly stated at acquisition date.

During the financial year ended 30th June 2008, Minor Limited sold inventory to Super Limited at a selling price of $150,000. Minor Limited had always sold goods to Super Limited at a gross profit of 10% on cost. The inventory of Super Limited as at 30th June 2008 consists of items amounting to $121,000 that was purchased from Minor Limited. Of the inventory Super Limited had on hand at 1st July 2007, $33,000 was purchased from Minor Limited. Goodwill associated with the acquisition of Minor Limited has impaired by $15,000 for the year ended 30th June 2008. For previous years impairment of goodwill was $35,000.

Super Limited remained the sole owner of Minor Limited as at 30th June 2008. Interim dividends paid by Minor Limited for year ended 30th June 2008 amounted to $50,000. On 30th June 2008 the directors of Minor Limited declared a final dividend of $60,000. The final dividend has been accounted for in the books of Super Limited and Minor Limited. Assume tax rate of 30 per cent.

Required: Prepare notional journal entries (with narrations) that are necessary to consolidate the accounts of Super Limited and its wholly owned subsidiary Minor Limited for the year ended 30th June 2008.