Question 1

Parent Ltd acquired 80% of the equity in Sub Ltd on 1 April 2014 for $13 600 000. At that date the equity of Sub Ltd comprised share capital of $8 000 000 and retained earnings of

$520 000.

Because Sub Ltd used the cost model for its recognised property, plant and equipment, it had several items whose book value was lower than fair value at the date of acquisition. The following table lists the identified assets and liabilities at their book and fair values:

As at the date of acquisition:	At book value:	At fair value:
Land and building	$2 080 000	$3 000 000
Land	2 500 000	4 200 000
Equipment	1 998 000	2 200 000
Other assets	3 900 000	3 900 000
Liabilities	( 1 958 000)	( 1 958 000)
Intangible assets	-	890 000
	8 520 000	12 232 000
Contingent liabilities	-	(340 000)
Net assets	$8 520 000	$11 892 000

Required:

Prepare the notional journal entry, as at 31 March 2019, to eliminate the Parent Ltd asset Investment in Sub Ltd and to eliminate the parents portion of equity in the Sub Ltd, in accordance with NZ IFRS 10 Consolidated Financial Statements and NZ IFRS 3 Business Combinations. Provide an acquisition analysis to support your notional journal entry.

Note: Your workings must be included on each line of your notional journal entry.

Notional journal entry on 31 March 2019 Yow workings must be shown on each line of the notional journal entry below: Acquisition analysis: Consideration at FV FV of the INA acquired: Goodwill acquired