Mike Ltd had acquired its 100% interest in Ross Ltd on 1 July 2018 which is four years earlier

for $1,094,600. At that date the owners’ equity of Ross Ltd was as follows:

Share capital 500,000

Retained earnings 425,000

At the date of acquisition all the assets of Ross Ltd were considered to be fairly valued except for the following:

Carrying amount Fair value

Plant (Cost $50,000) 40,000 70,000

Brand Name Not recognized 110,000

The plant has a remaining useful life of 5 years. The brand name was internally developed by Ross Ltd and is considered to have an indefinite life. All fair value adjustments are recorded on consolidation.

Other information

• The opening inventory of Mike Ltd as of 1 July 2021 included inventory purchased from Ross Ltd for $105,000. The original cost of the inventory was $87,500. All the inventory was sold outside the group during the 2022 financial year.
• During the year ended 30 June, 2022 Mike Ltd sold inventory to Ross Ltd for

$162,500. The original cost of the inventory was $100,000. Ross Ltd had sold 60% of the inventory outside the group by 30 June 2022.

• On 1 July 2020, Ross Ltd sold the plant to Mike Ltd for $120,000. The plant originally cost $100,000 and had a carrying amount at the date of sale of $80,000. At the date of sale the plant had a remaining useful life of ten years.
• Mike Ltd charges Ross Ltd a management fee of $66,250 each year.
• As of 30 June 2022 Ross Ltd owes Mike Ltd $100,000 for an interest-free loan.
• Management of Mike Ltd believes goodwill was impaired by $5,000 in the current financial year. Impairments of goodwill recorded in prior years total $6,500.
• During the year ended 30 June 2022, Ross Ltd declared and paid a dividend of $232,500. The applicable tax rate is 30%.

Required

1. Prepare all necessary consolidation adjustment entries needed to prepare the consolidated financial statements as of 30 June 2022.
2. If Mike’s acquisition was not 100%, describe how NCI is affected by intra-group transactions
3. What are reporting/disclosures would Mike need to do to account for the non-controlling interest?