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Prepare the adjusting journal entries for the consolidation

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Reference no: EM132628478

On 1 April 2019, Rosebud Ltd purchased 85% of the shares of Elmdale Ltd, for $175,000. At acquisition date, Elmdale Ltd's equity comprised:

ElmdaleLtd Asset revaluation surplus $20,000

Retained earnings                        22,000

Share capital                             123,000

On 1 April 2019, all the identifiable assets and liabilities of Elmdale Ltd were recorded at fair value. Additional information

(a) On 1 April 2019, Rosebud Ltd gave Elmdale Ltd a loan of $25,000, accruing interest at a rate of 8%.

(b) On 31 August 2019, Rosebud Ltd provided consulting services to Elmdale Ltd for $8,200. This is paid for in cash.

(c) During the period ending 31 March 2020, Elmdale Ltd paid $16,000 in cash dividends.

(d) During the period ending 31 March 2020, Elmdale Ltd declared (but not paid) $14,000 in dividends.

(e) During the reporting period ending 31 March 2020, Rosebud Ltd sold inventories to Elmdale Ltd for $16,000. The inventories had previously cost Rosebud Ltd $12,000.

(f) On 30 September 2019, Elmdale Ltd sold Rosebud Ltd Land for $80,000. This had originally cost Elmdale Ltd $30,000.

(g) The tax rate is 30%.

Required:

Problem 1: Using the information provided above, prepare the adjusting journal entries for the consolidation worksheet at 31 March 2020. Show all of your workings.

Reference no: EM132628478

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