On 1 July 2001 Carl Ltd acquired 75% of the shares of Peter Ltd when the shareholders equity of Peter Ltd was: Share Capital $150 000 General Reserve '35 4 000 Retained Earnings $ 4 000 The nancial statements for the two companies at 30 June 2003 appear below: Carl Ltd Peter Ltd $ $ Sales 425 875 201 000 Cost of Sales Inventory 1 July 2002 28 000 19 000 Purchases 198 000 86 000 226 000 105 000 Inventory 30 June 2003 32 000 22 000 194 000 83 000 Gross Prot 231 875 118 000 Dividend received from Peter 7 125 - Dividend received from Carl - 1 000 239 000 119 000 Marketing Expenses 41 000 26 000 Administration Expenses 64 500 32 000 Finance Expenses m m Total Operating Expenses 114 500 62 000 Operating Prot Before Tax 124 500 57 000 Income Tax Expense 59 500 22 000 Operating Prot Aer Tax 65 000 35 000 Retained earnings 1 July 2002 24 000 19 000 89 000 54 000 Interim Dividend 8 000 9 500 Proposed Dividend 45 000 22 500 53 000 32 000 Proposed Dividend 45 000 22 500 M M Retained earnings 20 June2003 36 000 22 000 Share Capital 300 000 150 000 General Reserve 38 000 19 500 10% debentures (due 2006) 50 000 - Dividend Payable 45 000 22 500 Current tax liability 59 500 24 000 Other current liabilities 30 100 19 400 558 600 257 400 Shares in Peter Ltd 120 500 - 10% debentures in Carl Ltd - 10 000 Other non-current assets 306 000 175 000 Inventory 32 000 22 000 Other current assets 100 100 50 400 558 600 257 400 Additional Information Partial goodwill method is applied. Intragroup sales for the year were: Carl Ltd to Peter Ltd $20 000 Peter Ltd to Carl Ltd $30 000 Opening inventory of Carl Ltd includes unrealised prot of $3000 on inventory sold by Peter Ltd. All of this inventory was sold by the end of the year. During the current year Peter Ltd purchased inventory from Carl Ltd at a prot of $7000. Half of this inventory has been sold outside the group by the end of the year. At the end of the year Carl Ltd also holds inventory purchased from Peter Ltd at a prot of $2000. An item of plant owned by Carl (cost of 40,000 and accumulated depreciation of 24,000) had been sold to Peter Ltd for 18,000 on 30 June 2002. Carl had depreciated this asset at 20% per annum straight-line on original cost. Assuming no change in the total economic life of the plant and equipment, Peter Ltd has applied 25% depreciation rate (straightline) from the date of transfer of the asset. Peter Ltd purchased 10% debentures in Carl Ltd on 1 July 2002. June JUZ. carl had depreciated ulis asset at 20 70 per am Straight-line on original Assuming no change Ifi t total economic life of the plant and equipment, Peter Ltd has applied 25% depreciation rate (straight-line) from the date of transfer of the asset. Peter Ltd purchased 10% debentures in Carl Ltd on 1 July 2002. . The directors have applied the impairment test for goodwill annually and determined that a write-down of $500 is required for consolidation purposes as at June 30 2003. Cumulative goodwill impairment write-downs for prior years totalled $500. . The tax rate is 30%. . Periodic inventory system is used. Required: . Prepare an acquisition analysis as at the date of Carl's acquisition of the shares in Peter Ltd (2 marks). . Prepare the consolidation journal entries as at June 30 2003 (14 marks). . Calculate non-controlling interests and prepare related journal entries (9 marks)
