For question1 why business combination valuation reserve entries do not record inventory's BCVR since the fair value for inventory is also increased.

For question 6 how do I decide a title is opening balance or closing balance. And why the closing balance is recorded like this? Thanks a lot

7. Consolidation 7.1 1. On 1 July 2012, Safe Ltd acquired 90% of the shares of Mission Ltd for $550,000. On 1 July 2012, the equity of Mission Ltd consisted of: Share capital General reserve Retained earnings $300,000 60,000 75,000 2. All the identifiable assets and liabilities of Mission Ltd were recorded at fair value on 1 July 2012 except for: Carrying amount Fair value Inventories Plant and equipment (cost $300,000) $ 90,000 $180,000 $ 105,000 $250,000 3. The above plant and equipment had a further 5-year life and was expected to be used evenly over that time. 4. During the year ended 30 June 2013, all inventories on hand at 1 July 2012 were sold. 5. On 1 May 2014, Mission Ltd sold inventory costing $50,000 to Safe Ltd for $80,000. On 30 June 2014, only 70% of these goods had been sold by Safe Ltd. 6. During the 2014-15 period, Mission Ltd sold inventory to Safe Ltd costing $130,000 for $160,000. At 30 June 2015, $20,000 worth of inventory is still held by Safe Ltd. 7. Mission Ltd paid dividends totaling $70,000 for the period ended 30 June 2015. 8. Safe Ltd uses the partial goodwill method. 9. Corporate tax rate of 30% applies, where applicable. Financial information for the year ended 30 June 2015 includes the following: Mission Ltd 190,000 Sales revenue Dividend revenue Other revenue Total revenue Cost of sales Other expenses Selling and administrative (including depreciation) Financial Safe Ltd $360,000 63,000 40,000 463,000 220,000 20,000 210,000 60,000 30,000 10,000 40.000 20.000 20 9. Corporate tax rate of 30% applies, where applicable. Financial information for the year ended 30 June 2015 includes the following: Mission Ltd 190,000 Sales revenue Dividend revenue Other revenue Total revenue Cost of sales Other expenses Selling and administrative (including depreciation) Financial Safe Ltd $360,000 63,000 40,000 463,000 220,000 20,000 210,000 60,000 30,000 10,000 Total expenses Profit before tax Income tax expense Profit after tax Retained earnings 1/7/14 40,000 290,000 173,000 40,000 133,000 ,00 193,000 (80,000) 113,000 20,000 90,000 120,000 30,000 90,000 100,000 190,000 (70,000) 120,000 Dividends paid Retained earnings 30/6/15 Required: For the year ended 30 June 2015, complete the Consolidation Worksheet Journal entries below to record the above transactions. When recording the Consolidation worksheet journal entries Non-controlling interest (NCI) NEEDS TO BE INCLUDED WHERE APPROPRIATE. 13 1. BUSINESS COMBINATION VALUATION RESERVE ENTRIES 188 1. BUSINESS COMBINATION VALUATION RESERVE ENTRIES DETAILS DEBIT CREDIT Working space $120,000 Accumulated depreciation Plant & Machinery BCVR $50,000 $49,000 $21,000 DTL Depreciation ($70,000/5years) RE ($70,000/5years*2years) Acc Depreciation $14,000 $28,000 $42,000 DTL $12,600 ITE $4,200 RE $8,400 2. PRE-ACQUISITION ENTRIES DETAILS DEBIT CREDIT Pre RE 1.7.12 $75 Inv sold (aft. tax) ($156*0.7) $10.5 Pre RE 1.7.14 $85.5 Share capital ($300k*90%) Gen Reserve ($60k*90%) RE (see working) $270,000 54,000 76,950 Safe's share COP E000/ 000 0 M DETAILS DEBIT CREDIT Inv sold (aft. tax) ($15k*0.7) $10.5 Pre RE 1.7.14 $85.54 Share capital ($300k*90%) Gen Reserve ($60k*90%) RE (see working) BCVR (see working) $270,000 54,000 76,950 Safe's share $85.5*90% = $76.95 44,100 Goodwill 104,950 Shares in Mission 550,000 BCVR 1.7.12 $59.5 Inv soldaft. tax) ($15k *0.7) ($10.5) BCVR 1.7.14 $49 Safe's share $49*90% = $44.1 18 3. STEP 1: NCI AT DATE OF ACQUISITION DETAILS DEBIT CREDIT Working space $30,000 6,000 Share capital ($300K*10%) Gen Reserve ($60k*10%) RE ($75k*10%) BCVR ($59.5k*10%) 7,500 5,950 M 3. STEP 1: NCI AT DATE OF ACQUISITION DETAILS DEBIT CREDIT Working space $30,000 6,000 Share capital ($300k*10%) Gen Reserve ($60k*10%) RE ($75k*10%) BCVR ($59.5k*10%) 7,500 5,950 NCI $49,450 4. STEP 2: NCI FROM DATE OF ACQUISITION TO BEGINNING OF CURRENT PERIOD DETAILS DEBIT CREDIT RE $540 NCI $540 RE 1.7.12 $75k RE 30.6.14 $100k 1 RE $25k Dep. (aft. tax) ($28k-$$8.4k) ($19.6k) $5.4k NCI $5.4K*10% = $0.54 NCI $1,050 BCVR $1,050 BCVR 1.7.12 $59.5 BCVR 30.6.14 $49 1 $10.5k NCI $10.5k*10% = $1.05k 5. STEP 3: NCI CURRENT PERIOD DETAILS DEBIT CREDIT 15 M D NCI $1,050 Dep. (aft. tax) ($28k-$$8.4k) ($19.6k) $5.4k NCI $5.4k*10% = $0.54 BCVR $1,050 BCVR 1.7.12 $59.5 BCVR 30.6.14 $49 $10.5k NCI $10.56*10% = $1.05k 5. STEP 3: NCI CURRENT PERIOD DETAILS DEBIT CREDIT $8,020 NCI share of profit NCI $90k $8,020 PAT Dep (aft.tax) ($14k-$4.2k) ($9.8k) $80.2k NCI $7,000 Dividend paid $7,000 NCI $80.2k* 10% = $8.02k 19 M 6. ELIMINATION OF THE EFFECTS OF INTRAGROUP TRANSACTIONS AT 30 JUNE 2015 Dividends paid DETAILS DEBIT CREDIT Working space Dividend revenue $63,000 Dividend paid $63,000 Opening inventory DETAILS DEBIT CREDIT S/P C/P Profit $80 $50 $30 RE $6,300 ITE 2,700 Cost of sales $9,000 NCI share of profit 630 Unsold 30% Unrealised profit $30k*30% = $9k RE 630 Closing inventory DETAILS DEBIT CREDIT Revenue $160,000 Profit in closing inventory S/P $160 C/P Cost of sales $156,250 $130 M Closing inventory DETAILS DEBIT CREDIT Revenue $160,000 Cost of sales $156,250 Profit in closing inventory S/P $160 C/P $130 Profit $ 30 Inventory $3,750 DTA $1,125 Unsold inventory $20k Unrealised profit $20/$160kk*$30k = $3.75k ITE $1,125 NCI $262.5 NCI share of profit $262.5 20 7.2 The consolidated financial statements of Solar Ltd are being prepared by the group accountant, Li Mei. She is currently in dispute with the auditors with the notion of 'realisation' of profit for depreciable non-current assets in relation to the Non-controlling interest(NCI). = M10 7. Consolidation 7.1 1. On 1 July 2012, Safe Ltd acquired 90% of the shares of Mission Ltd for $550,000. On 1 July 2012, the equity of Mission Ltd consisted of: Share capital General reserve Retained earnings $300,000 60,000 75,000 2. All the identifiable assets and liabilities of Mission Ltd were recorded at fair value on 1 July 2012 except for: Carrying amount Fair value Inventories Plant and equipment (cost $300,000) $ 90,000 $180,000 $ 105,000 $250,000 3. The above plant and equipment had a further 5-year life and was expected to be used evenly over that time. 4. During the year ended 30 June 2013, all inventories on hand at 1 July 2012 were sold. 5. On 1 May 2014, Mission Ltd sold inventory costing $50,000 to Safe Ltd for $80,000. On 30 June 2014, only 70% of these goods had been sold by Safe Ltd. 6. During the 2014-15 period, Mission Ltd sold inventory to Safe Ltd costing $130,000 for $160,000. At 30 June 2015, $20,000 worth of inventory is still held by Safe Ltd. 7. Mission Ltd paid dividends totaling $70,000 for the period ended 30 June 2015. 8. Safe Ltd uses the partial goodwill method. 9. Corporate tax rate of 30% applies, where applicable. Financial information for the year ended 30 June 2015 includes the following: Mission Ltd 190,000 Sales revenue Dividend revenue Other revenue Total revenue Cost of sales Other expenses Selling and administrative (including depreciation) Financial Safe Ltd $360,000 63,000 40,000 463,000 220,000 20,000 210,000 60,000 30,000 10,000 40.000 20.000 20 9. Corporate tax rate of 30% applies, where applicable. Financial information for the year ended 30 June 2015 includes the following: Mission Ltd 190,000 Sales revenue Dividend revenue Other revenue Total revenue Cost of sales Other expenses Selling and administrative (including depreciation) Financial Safe Ltd $360,000 63,000 40,000 463,000 220,000 20,000 210,000 60,000 30,000 10,000 Total expenses Profit before tax Income tax expense Profit after tax Retained earnings 1/7/14 40,000 290,000 173,000 40,000 133,000 ,00 193,000 (80,000) 113,000 20,000 90,000 120,000 30,000 90,000 100,000 190,000 (70,000) 120,000 Dividends paid Retained earnings 30/6/15 Required: For the year ended 30 June 2015, complete the Consolidation Worksheet Journal entries below to record the above transactions. When recording the Consolidation worksheet journal entries Non-controlling interest (NCI) NEEDS TO BE INCLUDED WHERE APPROPRIATE. 13 1. BUSINESS COMBINATION VALUATION RESERVE ENTRIES 188 1. BUSINESS COMBINATION VALUATION RESERVE ENTRIES DETAILS DEBIT CREDIT Working space $120,000 Accumulated depreciation Plant & Machinery BCVR $50,000 $49,000 $21,000 DTL Depreciation ($70,000/5years) RE ($70,000/5years*2years) Acc Depreciation $14,000 $28,000 $42,000 DTL $12,600 ITE $4,200 RE $8,400 2. PRE-ACQUISITION ENTRIES DETAILS DEBIT CREDIT Pre RE 1.7.12 $75 Inv sold (aft. tax) ($156*0.7) $10.5 Pre RE 1.7.14 $85.5 Share capital ($300k*90%) Gen Reserve ($60k*90%) RE (see working) $270,000 54,000 76,950 Safe's share COP E000/ 000 0 M DETAILS DEBIT CREDIT Inv sold (aft. tax) ($15k*0.7) $10.5 Pre RE 1.7.14 $85.54 Share capital ($300k*90%) Gen Reserve ($60k*90%) RE (see working) BCVR (see working) $270,000 54,000 76,950 Safe's share $85.5*90% = $76.95 44,100 Goodwill 104,950 Shares in Mission 550,000 BCVR 1.7.12 $59.5 Inv soldaft. tax) ($15k *0.7) ($10.5) BCVR 1.7.14 $49 Safe's share $49*90% = $44.1 18 3. STEP 1: NCI AT DATE OF ACQUISITION DETAILS DEBIT CREDIT Working space $30,000 6,000 Share capital ($300K*10%) Gen Reserve ($60k*10%) RE ($75k*10%) BCVR ($59.5k*10%) 7,500 5,950 M 3. STEP 1: NCI AT DATE OF ACQUISITION DETAILS DEBIT CREDIT Working space $30,000 6,000 Share capital ($300k*10%) Gen Reserve ($60k*10%) RE ($75k*10%) BCVR ($59.5k*10%) 7,500 5,950 NCI $49,450 4. STEP 2: NCI FROM DATE OF ACQUISITION TO BEGINNING OF CURRENT PERIOD DETAILS DEBIT CREDIT RE $540 NCI $540 RE 1.7.12 $75k RE 30.6.14 $100k 1 RE $25k Dep. (aft. tax) ($28k-$$8.4k) ($19.6k) $5.4k NCI $5.4K*10% = $0.54 NCI $1,050 BCVR $1,050 BCVR 1.7.12 $59.5 BCVR 30.6.14 $49 1 $10.5k NCI $10.5k*10% = $1.05k 5. STEP 3: NCI CURRENT PERIOD DETAILS DEBIT CREDIT 15 M D NCI $1,050 Dep. (aft. tax) ($28k-$$8.4k) ($19.6k) $5.4k NCI $5.4k*10% = $0.54 BCVR $1,050 BCVR 1.7.12 $59.5 BCVR 30.6.14 $49 $10.5k NCI $10.56*10% = $1.05k 5. STEP 3: NCI CURRENT PERIOD DETAILS DEBIT CREDIT $8,020 NCI share of profit NCI $90k $8,020 PAT Dep (aft.tax) ($14k-$4.2k) ($9.8k) $80.2k NCI $7,000 Dividend paid $7,000 NCI $80.2k* 10% = $8.02k 19 M 6. ELIMINATION OF THE EFFECTS OF INTRAGROUP TRANSACTIONS AT 30 JUNE 2015 Dividends paid DETAILS DEBIT CREDIT Working space Dividend revenue $63,000 Dividend paid $63,000 Opening inventory DETAILS DEBIT CREDIT S/P C/P Profit $80 $50 $30 RE $6,300 ITE 2,700 Cost of sales $9,000 NCI share of profit 630 Unsold 30% Unrealised profit $30k*30% = $9k RE 630 Closing inventory DETAILS DEBIT CREDIT Revenue $160,000 Profit in closing inventory S/P $160 C/P Cost of sales $156,250 $130 M Closing inventory DETAILS DEBIT CREDIT Revenue $160,000 Cost of sales $156,250 Profit in closing inventory S/P $160 C/P $130 Profit $ 30 Inventory $3,750 DTA $1,125 Unsold inventory $20k Unrealised profit $20/$160kk*$30k = $3.75k ITE $1,125 NCI $262.5 NCI share of profit $262.5 20 7.2 The consolidated financial statements of Solar Ltd are being prepared by the group accountant, Li Mei. She is currently in dispute with the auditors with the notion of 'realisation' of profit for depreciable non-current assets in relation to the Non-controlling interest(NCI). = M10