Hi,

The attached question is on consolidation on intra group companies for which i am not able to solve the answer correctly. Kindly request you help me solve this problem and understand it.

Thanks in Advance

On 1 July 2012, Wilson Ltd acquired all of the share capital of Marcus Ltd on a cum. div basis for $405,000. At that date, the relevant balances in the records of Marcus Ltd were: $ Share capital 250,000 Asset revaluation surplus 40,000 Retained earnings 75,000 Dividend payable 10,000 At the date of acquisition all assets and liabilities of Marcus Ltd were carried in their accounting records at fair values with the exception of the following assets: Land Equipment Carrying amount Fair value 180,000 51,000 195,000 60,000 The original cost of the equipment was $70,000 and it had a further six (6) year useful life as at the date of acquisition. Marcus Ltd accounts for land under the revaluation model in its books. The land has been adjusted in the books of Marcus Ltd immediately after acquisition. Marcus Ltd was involved in a court case that could potentially result in the company paying damages to a client. Marcus Ltd classified this as a contingent liability and Wilson Ltd estimated the fair value of this liability to be $20,000. Marcus Ltd settled the court case in January 2016 and the company was required to pay $25,000 to the client. Additional information: a) During the year ending 30 June 2015, Marcus Ltd sold inventory to Wilson Ltd for $22,000 at a mark-up of 25% on cost. None of this inventory was sold by Wilson Ltd by 30 June 2015. Wilson Ltd sold this entire inventory to external parties during March 2016 for $28,000. b) On 1 June 2016, Wilson Ltd sold inventory to Marcus Ltd for $32,000. This inventory had originally cost Wilson Ltd $25,000. Marcus Ltd sold $19,200 of this inventory to external parties for $20,000 on 20 June 2016. c) On 1 January 2015, Marcus Ltd sold an item of inventory to Wilson Ltd for $50,000. The inventory had cost Marcus Ltd $40,000. Wilson Ltd intends to use it as a non-current asset and has assessed the useful life to be four (4) years. d) The recoverable amount of the goodwill at 30 June 2016 was assessed to be $20,000. There have been no impairment write-downs of goodwill since acquisition date. e) The transfer to general reserve in the current year was out of retained earnings that existed at acquisition date. f) Marcus Ltd revalued the land to $205,000 on 1 June 2015. g) On realisation of the business combination valuation reserve, a transfer is made to retained earnings on consolidation. h) The tax rate is 30%. The financial statements of the two companies at 30 June 2016 are as follows: Wilson$ Marcus $ Revenues Expenses (290 000) Net profit before tax 000 Income tax expense 000) Net profit after tax 000 Retained earnings 1 July 2015 000 Dividend paid Dividend declared Transfer to general reserve Retained earnings 30 June 2016 Share capital General reserve Asset revaluation surplus Advance from Wilson Ltd Dividend payable Other liabilities TOTAL EQUITY AND LIABILITIES Cash Other receivables Dividend receivable Inventory 170000 Advance to Marcus Ltd Investment in Marcus Ltd Non-current assets TOTAL ASSETS 540 000 400 000 (220 000) 320 000 110 (145 000) (30 175 000 85 000 260 000 (40 000) (25 000) (20 000) 175 000 280 000 80 000 100 000 25 000 125 000 785 000 95 000 88 000 10 000 80 130 210 000 (12 000) (10 000) (15 000) 173 000 250 000 15 000 57 500 20 000 10 000 33 500 559 000 110 000 165 000 50000 20 000 395 000 127 000 785 000 114 000 559 000 Required: Prepare the consolidation journal entries for the Wilson Ltd group for the year ended 30 June 2016. Must show all workings