Question
Parent Ltd acquired equity in Subsidiary Ltd on 1 April 2011. At that date, the identifiable net assets were considered to be fairly valued and
Parent Ltd acquired equity in Subsidiary Ltd on 1 April 2011. At that date, the identifiable net assets were considered to be fairly valued and the equity of Subsidiary Ltd comprised:
| Share capital | $500 000 |
| Retained earnings | 94 000 |
| Asset revaluation surplus | 21 000 |
|
| $615 000 |
Parent Ltd has requested your help in the preparation of their consolidated financial statements for the financial year ended 31 March 2019 and has provided you with the following information:
- At 31 March 2019, Sub Ltd declared a final dividend of $35 000, and Parent Ltd declared a final dividend of $90 000. Both these dividends were paid during April 2019.
- Subsidiary Ltd rents a small part of its warehouse to Parent Ltd at a cost of $9 000 per annum. At 31 March 2019, Parent Ltd still owed Subsidiary Ltd $1 200 of rental for the year ended 31 March 2019.
- During March 2018, Subsidiary Ltd made sales to Parent Ltd of $7 600 and recognised a profit of $3 800. Parent Ltd sold this purchase of inventory to Me Ltd on 29 April 2018.
- During March 2019, Subsidiary Ltd made sales to Parent Ltd of $9 460. The inventory sold has cost Subsidiary Ltd $5 460. At 31 March 2019, the inventory Parent Ltd had on hand included this purchase from Subsidiary Ltd.
- In 2013 the total goodwill of Subsidiary Ltd was considered by the directors to be impaired by $4 100 and impaired again in 2016 by $2 500. The directors of Parent Ltd believe that the total goodwill has been further impaired by $1 200 during this financial year ended 31 March 2019.
- During March 2018, Parent Ltd made sales to Subsidiary Ltd of $6 000 and recognised a profit of $2 860. Subsidiary Ltd sold this inventory to Yu Ltd on 28 March 2018.
- During March 2019, Parent Ltd made sales to Subsidiary Ltd of $6 850. The inventory sold has cost Parent Ltd $3 750. The inventory of Subsidiary Ltd at 31 March 2019 included this purchase.
| Question 3 (a) continued: | |||||
| The Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 | |||||
|
| Parent Ltd | Sub Ltd | Notional Journal Entries | Group | |
| Balance Sheet items continued: | $ | $ | $ Dr | $ Cr | $ |
| Dividend payable | 90 000 | 35 000 | |||
| Various liabilities | 400 600 | 205 000 | |||
| Rent payable to Sub Ltd | 1 200 | - | |||
| Total liabilities | 491 800 | 240 000 | |||
| Total equity and liabilities | $1 791 800 | $1 237 520 | |||
| Cash | 18 800 | 4 380 | |||
| Inventory | 94 000 | 82 000 | |||
| Rent receivable | - | 1 200 | |||
| Dividend receivable | 35 000 | - | |||
| Various assets | 239 000 | 149 940 | |||
| PPE (net) | 605 000 | 1 000 000 | |||
| Investment in Subsidiary Ltd | 800 000 | - | |||
| Goodwill | - | - | |||
| Total assets | $1 791 800 | $1 237 520 | |||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Modern Auditing And Assurance Services
Authors: Philomena Leung, Paul Coram, Barry J. Cooper, Peter Richardson
6th Edition
1118615247, 9781118615249
