Question 1 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 Retained earnings Asset revaluation surplus $500 000 94 000 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 000. Both these dividends were paid during April declared a final dividend of 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 1 continued: Required: (a) Assume Parent Ltd acquired 100% of the equity in Subsidiary Ltd for $700 000 on 1 April 2011. Complete the consolidation worksheet, in the answer booklet, for Parent Ltd for ended 31 March 2019 in accordance with NZ IFRS 10 Consolidated the financial year Financial Statements and NZ IFRS 3 Business Combinations Note: You are required to include the notional journal entries (with workings) in your answer; these must be in the same order as per the class examples, i.e., (i) to (vii) (b) Assume Parent Ltd only acquired 80% of the equity in Subsidiary Ltd for $560 000 on 1 April 2011. The directors of Parent Ltd require the NCI in Subsidiary Ltd to be measured at fair value. Complete the consolidation worksheet, in the answer booklet, for Parent Ltd for the financial year ended 31 March 2019 in accordance with NZ IFRS 10 Consolidated Financial Statements and Z IFRS 3 Business Combinations Note: You are required to include the notional journal entries (with workings) in your answer; these must be in the same order as per the class examples, i.e., (i) to (vii) (c) Paragraph 19 of NZ IFRS 3 Business Combinations provides a choice of measurement for the non-controlling interest (NCI) in the acquiree. Start with your answer for (b) and reconcile the NCI measured at fair value to the NCI measured at the proportionate share in the recognised amounts of the subsidiary's identifiable net assets Describe the effect (with dollar amounts) on the Group financial statements if the NCI had been measured at the proportionate share in the recognised amounts of the subsidiary's identifiable net assets. Question 1 (a) Notional journal entries (with workings) continued: Question 1 (a) Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Parent Ltd Sub Ltd Notional Journal Entries Group Income statement/dividend items S Cr S 1450 000 1 200 000 Income (including dividend income) 1009 000 790 000 Less expenses (including COGS) Profit before tax 441 000 410 000 Less income tax expense 175 480 134 780 Profit after tax 306 220 234 520 Retained earnings - opening bal 480 000 300 000 Less: dividends declared 160 000 60 000 Balance Sheet items: Retained earnings - closing bal 474 520 626 220 Asset revaluation surplus 73 780 23 000 Share capital 600 000 500 000 Total equity $1 300 000 $997 520 Question 1 (a) continued on next page... Question 1 (b) Notional journal entries (with workings) Question 1 (b) Notional journal entries (with workings) continued: Question 1 (b) Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Parent Ltd Sub Ltd Notional Journal Entries Group S Cr Income statement/dividend items: $ S Dr Income 1 450 000 1 200 000 (including dividend income) 1009 000 Less expenses 790 000 (including COGS) 410 000 Profit before tax 441 000 Less income tax expense 134 780 175 480 Profit after tax 306 220 234 520 Less NCI portion of PAT Retained earnings - opening bal 480 000 300 000 60 000 Less dividends declared 160 000 Balance Sheet items: Retained earnings - closing bal 474 520 626 220 Asset revaluation surplus 73 780 23 000 Share capital 600 000 500 000 Total equity $1 300 000 $997 520 Question 1 (b) continued on next page... Question 1 (b) continued: The Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Group Parent Ltd Sub Ltd Notional Journal Entries Balance Sheet items continued: $ Cr Dividend payable 90 000 35 000 Various liabilities 400 600 205 000 Rent payable to Sub Ltd 1 200 Total liabilities 240 000 491 800 Total equity and liabilities $1 791 800 $1 237 520 Cash 18 800 4 380 94 000 82 000 Inventory 1 200 Rent receivable 35 000 Dividend receivable Various assets 149 940 379 000 PPE (net) 1 000 000 705 000 Investment in Subsidiary Ltd 560 000 Goodwill Total assets $1 791 800 $1 237 520 Question 1 continued: (c) Reconciliation of the two measurement methods for the NCI As per Question 1 (b) NCI measured at Fair value $ NCI measured at the proportionate share in the recognised amounts of the Subsidiary's INA Describe the effect (with dollar amounts) on the Group financial statements: Question 1 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 Retained earnings Asset revaluation surplus $500 000 94 000 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 000. Both these dividends were paid during April declared a final dividend of 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 1 continued: Required: (a) Assume Parent Ltd acquired 100% of the equity in Subsidiary Ltd for $700 000 on 1 April 2011. Complete the consolidation worksheet, in the answer booklet, for Parent Ltd for ended 31 March 2019 in accordance with NZ IFRS 10 Consolidated the financial year Financial Statements and NZ IFRS 3 Business Combinations Note: You are required to include the notional journal entries (with workings) in your answer; these must be in the same order as per the class examples, i.e., (i) to (vii) (b) Assume Parent Ltd only acquired 80% of the equity in Subsidiary Ltd for $560 000 on 1 April 2011. The directors of Parent Ltd require the NCI in Subsidiary Ltd to be measured at fair value. Complete the consolidation worksheet, in the answer booklet, for Parent Ltd for the financial year ended 31 March 2019 in accordance with NZ IFRS 10 Consolidated Financial Statements and Z IFRS 3 Business Combinations Note: You are required to include the notional journal entries (with workings) in your answer; these must be in the same order as per the class examples, i.e., (i) to (vii) (c) Paragraph 19 of NZ IFRS 3 Business Combinations provides a choice of measurement for the non-controlling interest (NCI) in the acquiree. Start with your answer for (b) and reconcile the NCI measured at fair value to the NCI measured at the proportionate share in the recognised amounts of the subsidiary's identifiable net assets Describe the effect (with dollar amounts) on the Group financial statements if the NCI had been measured at the proportionate share in the recognised amounts of the subsidiary's identifiable net assets. Question 1 (a) Notional journal entries (with workings) continued: Question 1 (a) Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Parent Ltd Sub Ltd Notional Journal Entries Group Income statement/dividend items S Cr S 1450 000 1 200 000 Income (including dividend income) 1009 000 790 000 Less expenses (including COGS) Profit before tax 441 000 410 000 Less income tax expense 175 480 134 780 Profit after tax 306 220 234 520 Retained earnings - opening bal 480 000 300 000 Less: dividends declared 160 000 60 000 Balance Sheet items: Retained earnings - closing bal 474 520 626 220 Asset revaluation surplus 73 780 23 000 Share capital 600 000 500 000 Total equity $1 300 000 $997 520 Question 1 (a) continued on next page... Question 1 (b) Notional journal entries (with workings) Question 1 (b) Notional journal entries (with workings) continued: Question 1 (b) Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Parent Ltd Sub Ltd Notional Journal Entries Group S Cr Income statement/dividend items: $ S Dr Income 1 450 000 1 200 000 (including dividend income) 1009 000 Less expenses 790 000 (including COGS) 410 000 Profit before tax 441 000 Less income tax expense 134 780 175 480 Profit after tax 306 220 234 520 Less NCI portion of PAT Retained earnings - opening bal 480 000 300 000 60 000 Less dividends declared 160 000 Balance Sheet items: Retained earnings - closing bal 474 520 626 220 Asset revaluation surplus 73 780 23 000 Share capital 600 000 500 000 Total equity $1 300 000 $997 520 Question 1 (b) continued on next page... Question 1 (b) continued: The Consolidation Worksheet for Parent Ltd for the financial year ended 31 March 2019 Group Parent Ltd Sub Ltd Notional Journal Entries Balance Sheet items continued: $ Cr Dividend payable 90 000 35 000 Various liabilities 400 600 205 000 Rent payable to Sub Ltd 1 200 Total liabilities 240 000 491 800 Total equity and liabilities $1 791 800 $1 237 520 Cash 18 800 4 380 94 000 82 000 Inventory 1 200 Rent receivable 35 000 Dividend receivable Various assets 149 940 379 000 PPE (net) 1 000 000 705 000 Investment in Subsidiary Ltd 560 000 Goodwill Total assets $1 791 800 $1 237 520 Question 1 continued: (c) Reconciliation of the two measurement methods for the NCI As per Question 1 (b) NCI measured at Fair value $ NCI measured at the proportionate share in the recognised amounts of the Subsidiary's INA Describe the effect (with dollar amounts) on the Group financial statements