Parent Ltd acquired 75% of the equity in Sub Ltd for $150 000 on 1 April 2004. Parent Ltd has provided you with the following general ledger account balances for the year ended 31 March 2021. NCI is 25% and NCI is measured at Fair Value.

	Parent Ltd	Sub Ltd
Income statement/dividend items:	$	$
Income (all types of income)	522 500	275 000
Less expenses	410 000	197 000
Profit before tax	112 500	78 000
Less income tax expense	50 000	18 000
Profit after tax	62 500	60 000
Retained earnings opening balance	50 000	40 000
Less: dividends declared and paid	50 000	15 000
Balance Sheet items:
Retained earnings closing balance	62 500	85 000
Share capital	400 000	100 000
Various liabilities	127 900	70 000
Loan payable to Sub Ltd	2 100	-
Bank loan	92 500	30 000
Total equity and liabilities	$685 000	$285 000
Receivables	40 000	20 000
Inventory	120 000	55 000
Loan receivable	-	2 100
Non-current assets	375 000	207 900
Investment in Sub Ltd	150 000	-
Total assets	$685 000	$285 000

Additional information:

(i) On 1 April 2004, the equity of Sub Ltd comprised: Share capital of $100 000 and Retainedearnings of $30 000. The net assets of Sub Ltd were considered to be fairly valued at the date of acquisition.

(ii)The directors decided that the goodwill arising on consolidation has been further impairedby $4 000 at 31 March 2021. In previous years, the goodwill had been impaired by a total of $26 000.

(iii) The non-controlling interest (NCI) is to be measured at fair value.

(iv) Towards the end of March 2020, Sub Ltd had made sales to Parent Ltd amounting to $20 000. The inventory sold had cost Sub Ltd $15 000. The inventory of Parent Ltd as at31 March 2020 included this purchase.

Part 1

Required:

(i) Prepare a Consolidation Worksheet, for the year ended 31 March 2021, in accordance with

NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements. You are not required to include your notional journal entries in the assignment answer booklet.

Question 3 Part A (i) Consolidation Worksheet as at 31 March 2021
	Parent Ltd	Sub Ltd	Notional adjustments		Group
Income statement/dividend items:	$	$	Dr	Cr	$
Income (all types of income)	522 500	275 000
Less expenses	410 000	197 000
Profit before tax	112 500	78 000
Less income tax expense	50 000	18 000
Profit after tax	62 500	60 000
Less: PAT attributed to NCI
Group PAT after NCI
Retained earnings opening bal	50 000	40 000
Less: dividends declared	50 000	15 000
Balance Sheet items:
Retained earnings closing bal	62 500	85 000
Share capital	400 000	100 000
Various liabilities	127 900	70 000
Loan payable to Sub Ltd	2 100	-
Bank loan	92 500	30 000
Total equity and liabilities	$685 000	$285 000			$
Receivables	40 000	20 000
Inventory	120 000	55 000
Loan receivable	-	2 100
Non-current assets	375 000	207 900
Investment in Sub Ltd	150 000	-
	-	-
Total assets	$685 000	$285 000			$

(ii) Prepare the notional journal entry to recognise the NCI, but assume the directors wanted the NCI to be measured at the NCIs proportionate share of the Sub Ltds identifiable net assets. Note: You must include your workings on each line of your notional journal entry.

Part 2

For this part of the question, assume the net assets of Sub Ltd were not fairly valued at the date of acquisition. On 1 April 2004, Sub Ltd had a contingent liability of $5 000, an

unrecognised internally generated intangible with a fair value of $12 000, and equipment with a book value of $45 000 that had a fair value of $52 000. The rest of the information provided on page 5 is still relevant.

Required:

Prepare all the necessary notional journal entries required by NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements to consolidate the financial statements of Parent Ltd and Sub Ltd for the year ended 31 March 2021.