Accounting - NCI

On 1 July 2012, Ninja Ltd acquired 70% of the share capital of Baby Ltd for $2,650,000 paid in cash. At the date of acquisition, the accounts of Baby Ltd include the following:

Share Capital $2,400,000

General Reserve $580,000

Retained Earnings $600,000

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

Carry Amount Fair Value

Inventory $250,000 $280,000

The inventory was sold outside the group for $240,000 by the 30 June 2016.

Additional Information:

a) The inventory of Ninja Ltd on 1 July 2016 included inventory purchased from Baby Ltd for $104,500. The original cost of the inventory was $69,500. The inventory was sold outside the group in January 2017.

b) On 1 July 2016, Ninja Ltd borrowed $160,000 from Baby Ltd. This amount is to be repaid in full on 1 June 2019. The interest expense on the borrowing is $16,000 per annum. Ninja Ltd has paid $5,000 of the interest expense during the year ended 30 June 2017.

c) On 1 August 2012, Ninja Ltd sold land for $1,350,000. The land originally cost Ninja Ltd $1,210,000. The land was sold outside the group by 30 June 2017.

d) Ninja Ltd uses the proportional interest goodwill method. The goodwill is not impaired.

The financial statements of Baby Ltd for the year ended 30 June 2017 showed:

Profit before tax $470,000

Income tax expense $141,000

Profit after tax $329,000

Retained Profits - Op balance $705,000

Dividend Paid ($70,000)

Retained Profits - Cl Balance $964,000

Share Capital $2,400,000

General Reserve $580,000

The applicable tax rate is 30%.

The completed acquisition analysis and consolidation entries are as follows.

Acquisition Analysis

Purchase consideration $2,650,000

Less: FVINA

Share Capital $2,400,000

General Reserve $580,000

Retained Earnings $600,000

FVA $21,000

$3,601,000

x Interest Acquired (70%) $2,520,700

Goodwill on Acquisition $129,300

Consolidation Entries:

Elimination entry:

DR Share Capital $1,680,000

DR General Reserve $406,000

DR Retained Earnings $420,000

DR FVA $14,700

DR Goodwill $129,300

CR Investment in Subsidiary $2,650,000

Sale of revalued land:

DR Retained Earnings $21,000

CR FVA $21,000

Intra-group sale of inventory (upstream):

DR Retained Earnings $35,000

CR COGS (104,500 - 69,500) $35,000

DR ITE $10,500

CR Retained Earnings $10,500

Intra-group Borrowing:

DR Accounts Payable $160,000

CR Accounts Receivable $160,000

DR Interest Revenue $16,000

CR Interest Expense $16,000

DR Interest Payable $11,000

CR Interest Receivable $11,000

Intra-group sale of land (downstream):

DR Retained Earnings $140,000

CR Gain on Sale $140,000

DR ITE $42,000

CR Retained Earnings $42,000

Intra-group dividend:

DR Dividend Revenue $49,000

CR Dividend Paid $49,000

Required:

1) Create a memorandum for the NCI share of profits for the year ended 30 June 2017.

2) Create a memorandum for the NCI share of shareholder's equity as at 30 June 2017