A Ltd purchased 100% of the outstanding ordinary shares of B Ltd on 31 December, 2018 at a cost of $196,000. At that date the Share Capital of B Ltd was $50,000. The Retained Profits were $86,000. Payment was made in cash $196,000.

The fair market value of the fixed assets of B Ltd. was $160,000, the cost was $140,000 and the accumulated depreciation was $40,000. Other assets in the accounts of B

Question 3 (15 marks) A Ltd purchased 100% of the outstanding ordinary shares of B Ltd on 31 December, 2018 at a cost of $196,000. At that date the Share Capital of B Ltd was $50,000. The Retained Profits were $86,000. Payment was made in cash $196,000. The fair market value of the fixed assets of B Ltd. was $160,000, the cost was $140,000 and the accumulated depreciation was $40,000. Other assets in the accounts of B Ltd had a fair value equal to the carrying amount. Fixed Assets in both companies are depreciated over 10 years' straight line. Required: Complete the consolidation worksheet at 31 December, 2019. Assets are to be revalued in the accounts of the group, not in the subsidiary. Goodwill is not impaired. The rate of taxation is 30%. Sales Cost of Sales Consolidation worksheet for 31 December 2019 A Ltd B Ltd Dr Ref 300 000 cr 100 000 cr 200 000 dr 40 000 dr General Expenses Depreciation 50 000 dr 30 000 dr 20 000 dr 14 000 dr Tax Expense Dividend Income 6 000 dr 5 000 cr 7 800 dr Dividend Accrued/Expensed Retained Profits for the year 2019 10 000 dr 5 000 dr Fixed Assets Accumulated Depreciation Investment in S Ltd Goodwill $9 000 cr 300 000 dr 130 000 cr $13 200 cr 140 000 dr 54 000 cr 196 000 dr Inventory Current Assets 55 000 dr Account Receivable - S Ltd. Dividend Receivable 25 000 dr 5 000 dr Cash 54 000 dr 67 200 dr $505 000 $179 200 25 000 cr 10 000 cr 100 000 cr 5 000 cr 50 000 cr 386 000 cr 86 000 cr Account Payable - H Ltd. Deferred Tax Liability Dividend Payable Share Capital Asset Revaluation Reserve Opening Retained Profits (1 Jan. 2019) 20 000 dr 6 000 dr Cr Group Retained Profits for the year 2019 9 000 cr 13 200 cr $505 000 $179 200