January 2020, Fun Ltd acquired 60% of the ordinary voting shares of Plex Ltd for a cash payment of $500,000. At the date of acquisition, the fair value of Plex Ltd's identifiable assets and liabilities are represented by: Share capital $100,000 Retained profits 1.1.20 $300,000 The trial balances of Fun Ltd and Plex Ltd at 31 December 2020 (one year after acquisition) are shown below: Fun Ltd Plex Ltd DR CR DR CR $ $ $ $ Share capital 500,000 100,000 Retained profits 1.1.20 960,000 300,000 Cash at bank 590,000 300,000 Inventory 180,000 180,000 Plant and equipment 800,000 400,000 Accumulated depreciation 350,000 150,000 Investment in Plex Ltd 500,000 Accounts payable 200,000 590,000 Sales revenue 900,000 800,000 Cost of sales 760,000 600,000 Depreciation expense 80,000 60,000 Answer Part 1, 2, 3 and 4. Part 1 The group balance sheet at 31 December 2020 will include in the asset section: a. Investment in Plex Ltd $500,000 Goodwill $260,000 b. Goodwill $260,000 c. Investment in Plex $500,000 Goodwill $100,000 d. Goodwill $100,000 e. Both investment in Plex Ltd and Goodwill will not be included. Part 2 The group income statement will disclose profit attributable to the shareholders of Fun Ltd equal to: a. $1,700,000 b. $700,000 c. $200,000 d. $144,000 e. $140,000 Part 3 The group balance sheet at 31 December 2020 will include in the equity section: a. Share capital $ 500,000 Retained profits $ 960,000 b. Share capital $ 500,000 Retained profits $ 960,000 Non-controlling interest $ 160,000 c. Share capital $ 500,000 Retained profits $1,104,000 Non-controlling interest $ 216,000 d. Share capital $ 600,000 Retained profits $1,160,000 e. Share capital $ 500,000 Retained profits $1,100,000 Part 4 On 1 December 2021, Plex Ltd sold inventories to Fun Ltd. The cost of inventories at Plex Ltd is $ 20,000, and the sales price is $ 30,000. These inventories were still on hand at Fund Ltd as at 31 December 2021. The consolidation worksheet journal entries for eliminating the intragroup inventory sale prepared at 31 December 2021 are:

a. DR. Sales $ 30,000 CR. Cost of goods sold $ 20,000 CR. Inventory $ 10,000

b. DR. Sales $ 18,000 CR. Cost of goods sold $ 12,000 CR. Inventory $ 6,000

c. DR. Sales $ 30,000 CR. Cost of goods sold $ 20,000 CR. Inventory $ 10,000 DR. Deferred tax asset $ 3,000 CR. Income tax expense $ 3,000

d. DR. Sales $ 18,000 CR. Cost of goods sold $ 12,000 CR. Inventory $ 6,000 DR. Deferred tax asset $ 1,800 CR. Income tax expense $ 1,800

e. No journal entries required to eliminate the intragroup inventory sale