Reference no: EM13300972

Question

On 1 July 2011, Geraldton Ltd acquired 80% of the share capital of Pilbara Ltd for $132 400. On that date, the statement of financial position of Pilbara Ltd consisted of:

Share Capital	$125 000
General Reserve	5 000
Revaluation Reserve	7 500
Retained Earnings	5 000
Liabilities	90 000
	$232 500
Cash	$  30 000
Inventories	35 000
Land	32 500
Plant and equipment	150 000
Accumulated Depreciation	(65 000)
Patent	50 000
	$232 500

All the identifiable assets and liabilities of Pilbara Ltd were recorded at fair value except for:

	Carrying amount	Fair value
Inventories	$  35 000	$  40 000
Land	32 500	42 500
Plant and equipment (cost $100 000)	35 000	45 000

The plant and equipment had a further 5-year life and is depreciated on a straight line basis. The differences between carrying amounts and fair value on acquisition date are adjusted on consolidation. Geraldton Ltd uses the partial goodwill method.

During the year ended 30/6/2012, all inventories on hand at 1/7/2011 were sold. The income tax rate is assumed to be 30%. Also in the current year, Pilbara Ltd sold inventory to Geraldton Ltd for $4000 (cost $2500). One-third of this inventory was on hand at the end of the year.

There were no changes during the year in any element of Geraldton's or Pilbara Ltd's equity except for retained earnings.

The following shows financial information for Geraldton Ltd and Pilbara Ltd for the year ended 30/6/2012.

	Geraldton Ltd	Pilbara Ltd
Sales revenue	$100 000	$86 000
Other income	42 500	17 500
	142 500	103 500
Cost of sales	81 000	64 000
Other expenses	26 500	15 500
	107 500	79 500
Profit before tax	35 000	24 000
Income tax expense	10 000	9 000
Profit	25 000	15 000
Retained earnings 1/7/2011	15 000	5 000
	40 000	20 000
Interim dividend paid	6 000	5 000
Final dividend paid	3 000	2 000
	9 000	7 000
Retained earnings 30/6/2012	$31 000	$ 13 000

Required:

(1) Prepare the consolidation worksheet entries necessary for preparation of the consolidated financial statements for Geraldton Ltd and its subsidiary for the year ended 30/6/2012

(2) Prepare the consolidated statement of comprehensive income and statement of changes in equity for Geraldton Ltd and its subsidiary at 30/6/2012.