Reference no: EM132784871
Question - On 1 July 2018, Parent Ltd acquired 80% of the ordinary voting shares of Child Ltd which in turn acquired 90% of the ordinary voting shares of Grandchild Ltd.
The fair value of the net assets of Grandchild Ltd at the date of acquisition are represented by total shareholders' equity as follows:
Share capital 200,000
Retained profits 100,000
Total shareholders' equity 300,000
The net profits of and dividends paid by Grandchild Ltd for the two years ending 30 June 2019 and 30 June 2020 are as follows:
The After Tax Profit for the year ended on 30 June 2019 140,000
Dividends paid for the year ended on 30 June 2019 (40,000)
The After Tax Profit for the year ended on 30 June 2020 200,000
The following intra-group transaction had occurred since the acquisition the date:
During the current period Child Ltd sold an inventory to Grandchild Ltd at a before tax profit of $10,000, all the inventory remains on hand of the Grandchild Ltd at 30 June 2020.
On 1st July 2019 Parent Ltd sold a plant to Grandchild Ltd for $10,000, the original cost of this plant to the Parent Ltd was $10,000, with the accumulated depreciation of $2,000 on the date of the transfer.
There are no other changes in the equity for Grandchild Ltd.
REQUIRED -
A) Prepare a table that shows the ownership interest percentages in the two subsidiaries distinguishing between direct and indirect interests.
B) Based on the information provided, prepare the consolidation journal entries necessary to allocate the non-controlling interest in Grandchild Ltd as at 30 June 2020.