British Matchbox Cars Case

$On1$ July $20X5,BMCLtd(originally$ known $as$ British Matchbox Cars $Ltd)$ acquired $60\%of$ the issued voting shares

$of$ Austin $Ltd$ for consideration $of$ $$222,000,$ and Austin $Ltd$ acquired $80\%of$ the issued voting shares $ofAHLtd$

$(the$ maker $of$ Austin$-$Healey matchbox cars$)$ for consideration $of$ $$166,000.$

$On$ the same day, $BMCLtd$ purchased the remaining $20\%of$ the issued voting shares $inAHLtd$ held $byan$

institutional investor for consideration transferred $of$ $$41,600.$ The following group structure resulted from these

acquisitions.

The separate accounting records $of$ Austin $Ltd$ and $AHLtdat1$ July $20X5$ include the following balances:

$At$ the date $of$ acquisition, all identifiable assets and assumed liabilities $of$ Austin $Ltd$ and $AHLtd$ were carried $in$

their accounting records $at$ fair value with the exception $ofan$ item $of$ property, plant and equipment $inAHLtds$

financial statements, which was stated $atan$ amount $of$ $$80,000$ below its fair value. The restatement $to$ fair value

$istobe$ accounted for $as$ a consolidation adjustment.

After a complete due diligence investigation was undertaken, $it$ was determined that $no$ other unrecognised

assets, liabilities $or$ contingent liabilities $of$ any sort exist.

Extracts from the management financial statements $of$ the three entities for $30$ June $20X6$ are set out below.

Management Statements $of$ Comprehensive Income for the year ended $30$ June $20X6$

$BMCLtd$

$

Austin $Ltd$

$

$AHLtd$

$

Revenues $1,342,000644,000310,000$

Expenses excluding finance costs $(1,088,000)(444,000)(220,000)$

Profit before tax $254,000200,00090,000$

Tax expense $(102,000)(80,000)(40,000)$

Profit for the year $152,000120,00050,000$

Retained earnings $at\frac{1}{7}\frac{?}{20x5}48,00030,00016,000$

Available for appropriation $200,000150,00066,000$

Interim dividend paid $(20,000)(10,000)-$

Final dividend declared $(32,000)(36,000)(14,000)$

Transfer $to$ statutory reserve $(50,000)(12,000)(8,000)$

Retained earnings $at\frac{30}{6}\frac{?}{20x6}98,00092,00044,000$

Austin $Ltd$

$

$AHLtd$

$

Issued capital $200,000140,000$

Statutory reserve $60,00052,000$

Retained earnings $at\frac{1}{7}\frac{?}{20x5}30,00016,000$

Total $290,000208,000$

Management Statements $of$ Financial Position $asat30$ June $20X6$

$BMCLtd$

$

Austin $Ltd$

$

$AHLtd$

$

Assets

Dividend receivable $24,40011,200-$

Shares $in$ Austin $Ltd222,000--$

Shares $inAHLtd41,600166,000-$

Land $-60,000-$

Property, plant and equipment $(net)464,000178,000192,000$

Receivable from Austin $Ltd40,000--$

Inventories $212,00083,600136,000$

Other current assets $200,00061,20072,000$

Total assets $1,204,000560,000400,000$

Shareholders$$ equity

Issued capital $500,000200,000140,000$

Statutory reserve $290,00072,00060,000$

Retained earnings $98,00092,00044,000$

Liabilities

Dividend payable $32,00036,00014,000$

Payable $toBMCLtd-40,000-$

Other liabilities $284,000120,000142,000$

Total equities and liabilities $1,204,000560,000400,000$

Additional Information

$*At1$ July $20X5$ the remaining useful life $of$ the property, plant and equipment assets held $by$ the two

subsidiaries $is10$ years.

$*At30$ June $20X6$ Austin $Ltd$ had sold all $of$ the inventories $it$ had $on$ hand $at1$ July $20X5$ while $AHLtd$ had sold

$75\%of$ the inventories $it$ held $at$ that same date.

$*$ Included $in$ the closing inventories $of$ Austin $Ltd$ were items purchased from $AHLtd$ during $20X6$ for $$22,000.$

These items had originally cost $AHLtd$ $$16,000.$

$*BMCLtd$ sold inventories $toAHLtd$ during $20X6$ for $$54,000.$ These inventories had cost $BMCLtd$ $$40,000.$ Half

$of$ these inventories were sold $to$ external parties $byAHLtd$ during $20X6$ for $$30,000.$ All entities $in$ the $BMC$

$Ltd$ group have adopted the periodic inventory system.

$*$ Any goodwill arising from the acquisition and investment $in$ Austin $Ltd$ and $AHLtd$ recognised have not been

impaired since acquisition.

$*$ All transfers $to$ statutory reserves were from post$-$acquisition profits.

$*$ Dividends declared $by$ subsidiary entities are accrued $as$ revenue.

$*$ The intragroup receivabl$\frac{e}{p}$ayable between $BMCLtd$ and Austin $Ltd$ relates $to$ a short$-$term interest$-$free loan.

$*$ The proportionate interest $in$ goodwill method has been adopted for the measurement $of$ NCI $at$ acquisition

date.

$*$ The corporate tax rate $is30\%.$

Required

$(a)$ Prepare all consolidation journal entries necessary $in$ relation $to$ the consolidation $ofBMCLtd,$ Austin $Ltd$

and $AHLtdat30$ June $20X6.$

$(b)$ Post the consolidation journal entries $to$ the consolidation worksheet.

$(c)$ Prepare $an$ NCI memorandum account $to$ calculate the NCI $in$ both Austin $Ltd$ and $AHLtd.$

$(d)$ Use the consolidation worksheet and NCI memorandum account $to$ complete the consolidated

statements $of$ comprehensive income, changes $in$ equity and financial position $of$ the