Portsmouth Ltd is a manufacturer of sunglasses and Skyline Ltd is a manufacturer of sunscreens. In anticipation of high revenue growth rate of Skyline Ltd, on 1 January 2022, Portsmouth Ltd acquired 70% of the shares of Skyline Ltd by paying $33,800 cash to Skyline Ltd. The fair value of the non-controlling interests was $13,600 on the acquisition day. The followings reflect the financial performance and financial position of both companies on 31 December 2023.

Income Statement for the year ended 31 December 2022
	Portsmouth Ltd	Skyline Ltd
Sales	20,360	9,757
Cost of sales	(2,690)	(1,296)
Gross profit	17,670	8,461
Other expenses	(1,965)	(870)
Operating profit	15,705	7,591
Dividend income from Skyline Ltd	98
Profit before tax	15,803	7,591
Tax expense	(3,141)	(1,518)
Profit after tax	12,662	6,073
Dividends declared	(300)	(140)
Profit retained	12,362	5,933
Retained earnings on 1 Jan	8,428	5,100
Retained earnings on 31 Jan	20,790	11,033

Statement of Financial Position as at 31 December 2022
	Portsmouth Ltd	Skyline Ltd
Assets
Property, plant and equipment	62,000	32,000
Investment in Skyline Ltd	33,800	-
Inventories	9,280	4,760
Account receivables	8,150	3,230
Cash	2,350	1,200
	115,580	41,190
Equity and Liabilities
Share capital	86,000	25,000
Retained earnings	20,790	11,033
Non-current liabilities	5,280	3,227
Current liabilities	3,510	1,930
	115,580	41,190

Additional Information:

1) The equity balance of Skyline Ltd on the acquisition day consisted of share capital

of $25,000 and retained earnings of $5,100.

2) The accountant of Portsmouth Ltd found that, on 1 January 2022, there was an

in-process research and development project undertaken by the Skyline Ltd and the

cost incurred under this project was $9,000. This amount was recognized as an

expense in the financial statement of Skyline Ltd. However, the accountant judged

that this project had met the definition of an intangible asset. The remaining useful

life of this intangible asset was 10 years from the acquisition day

3) On the acquisition day, Portsmouth Ltd asked a professional to revalue the net assets of Skyline Ltd. It was found that the fair value of the net assets was equal to

their book value EXCEPT that there should be a fair value increase of the factory

building by $13,000 and an impairment loss of the accounts receivable by $500. The

remaining useful life of this factory building was 20 years from the acquisition day.

4) Three months before the acquisition, several workers of Skyline Ltd were injured

owing to the unsafe working condition in one of the production lines. Accordingly,

these workers took legal action against the company for claiming damages. As of

31 December 2021, the verdict for this legal case was still pending and the companys

experienced lawyer opined that the outcome is not probable based on the following

estimations:

	Probability	Damages to be paid within 1 year
Win the lawsuit	0.7	Nil
Lose the lawsuit	0.3	$29,000

Therefore, on 31 December 2021, the above event was disclosed as a contingent

liability in the notes to financial statements of Skyline Ltd.

5) The accounting policy of Portsmouth Ltd requires that the measurement of NCI on

acquisition day should be based on fair value approach.

6) Tax rate is 20%.

Required: (All figures should be rounded to zero decimal place.)

1. Based on the relevant International Financial Reporting Standard, prepare the

following consolidation journal entries for the year ended 31 December 2022.

(Narratives are not required.)

CJE1: Eliminate Investment in Skyline Ltd

CJE2: Adjustment of depreciation and amortization on FV change of S Ltds asset

CJE3: Adjustment of tax effect of CJE2

CJE4: Elimination of dividends income and declared between P Ltd and S Ltd

CJE5: Allocate post-acquisition profits of Skyline Ltd to NCI

2. Prepare the Consolidated Financial Statements of Portsmouth Ltd

as at 31 December 2022. (Use Worksheet Approach)

3. Show the workings and answers for:

(i) Parents share of goodwill on the acquisition day

(ii) NCIs share of goodwill on the acquisition day

(iii) Consolidated retained earnings as at 31 December 2022

(iv) NCI balance as at 31 December 2022 (Three Components Approach)