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Prepare the necessary consolidation entries on july

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Reference no: EM132676780

Topic on Consolidation On 1 July 2018, Parent bought 100% of Subsidiary for $80,000.On that day, Subsidiary's equity consisted of:

  • Share capital$60,000
  • Retained earnings$15,000

All assets and liabilities were valued at fair value in Subsidiary on the day of acquisition

Additional information

  • On 18 December 2018, Parent sold some inventory to Subsidiary for $5,000 and recorded a profit of $1,000. Subsidiary has sold 60% of this inventory and the remaining is still on hand at the end of 30 June 2019.
  • On 30 June 2019, Parent assessed that the goodwill in Subsidiary was impaired by $6,000.
  • On 1 June 2019, Parent and Subsidiary entered into an agreement whereby Subsidiary will pay Parent $1,000 every month as management consulting fee.Subsidiary is yet to pay the fee for June 2019.

Problem 1: Prepare the necessary consolidation entries on 1 July 2018 for the year ending 30 June 2019. Tax rate is 30%.

Reference no: EM132676780

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