Reference no: EM132980848

Question - Parent Ltd acquired all the equity in Sub Ltd on 1 April 2015 for $550,000 cash. At that date the equity of Sub Ltd comprised share capital of $157,000 and retained earnings of $150,000.

Because Sub Ltd used the cost model for its property, plant and equipment, it had several items whose book value was different to the fair value at the date of acquisition. The following table lists the recognised assets and liabilities at their book values:

As at the date of acquisition:

At book value:

Accounts receivable $4,000

Land and building 730,000

Equipment 398,000

Other assets 120,000

Liabilities (945,000)

Net assets $307,000

The table below lists the identified assets and liabilities of Sub Ltd at their fair values:

As at the date of acquisition:

At fair value:

Accounts receivable $3,700

Land and building 980,000

Equipment 370,000

Other assets 120,000

Unrecognised intangible assets 40,000

Liabilities (945,000)

Unrecognised contingent liabilities (93,000)

Identified net assets $475,700

Required - Prepare the notional journal entry, as at 31 March 2020, to eliminate the Parent Ltd asset 'Investment in Sub Ltd' and to eliminate the parent's portion of equity in the Sub Ltd, in accordance with NZ IFRS 10 Consolidated Financial Statements and NZ IFRS 3 Business Combinations. Note: Your workings must be included on each line of your notional journal entry.