QUESTION 1-Consolidation: Direct non-controlling interest 15 MARKS On 1 July 2014, Parent Ltd acquired 75% of the issued shares of Sub Ltd paying $5,130,000 in cash. The separate accounting records of Sub Ltd at 1 July 2014 include the following equity balances: $4,000,000 $1,000,000 $1,200,000 Issued capital General reserve Retained earnings At the date of acquisition, all assets of Sub Ltd were carried in their accounting records at fair value except for land which had a carrying amount of $364,000. The land had a fair value of $884,000. Sub Ltd chose to continue to record the asset under the cost model. The tax rate is 30 % The summarised financial statements of the entities as at 30 June 2017 is as follows: Parent Ltd Sub Ltd S Total Operating profit after tax 680,000 800,000 1,480,000 Retained earnings 1/7/16 Available for appropriation Final dividend paid Retained earnings 30/6/17 Issued capital General reserve 3,220,000 1,300,000 4,520,000 3,900,000 2,100,000 6,000,000 (500,000) 5,500,000 11,000,000 (500,000) 3,400,000 2,100,000 7,000,000 4,000,000 4.000,000 2.000,000 2000,000 12,400,000 8,100,000 20,500,000 Total Equity Liabilities (including DTLS) 1,700,000 1,600,000 100,000 Total Equities and Liabilities 14,000,000 8,200,000 22,200,000 4,700,000 1,700,000 6,400,000 Land 5,130,000 5,130,000 Investment in Sub Ltd Other assets (including DTAS) Total Assets 10,670,000 4,170,000 6,500,000 8,200,000 22,200,000 14,000,000 Required: A. Prepare the acquisition analysis as at acquisition date (1/7/2014) showing both the Parent's equity interest (PEI) and the non-controlling interest (NCI) (5 marks) B. State the amount that would be disclosed in the consolidated financial statements at 30 June 2017 for Investment in Sub Ltd and explain why (1 mark) Based on the information provided, using the proportionate goodwill method show all the consolidation journal entries, including all related tax effects, and NCI journal entries required upon consolidation as at 30 June 2017. The land has not been sold. C. (9 marks) QUESTION 1-Consolidation: Direct non-controlling interest 15 MARKS On 1 July 2014, Parent Ltd acquired 75% of the issued shares of Sub Ltd paying $5,130,000 in cash. The separate accounting records of Sub Ltd at 1 July 2014 include the following equity balances: $4,000,000 $1,000,000 $1,200,000 Issued capital General reserve Retained earnings At the date of acquisition, all assets of Sub Ltd were carried in their accounting records at fair value except for land which had a carrying amount of $364,000. The land had a fair value of $884,000. Sub Ltd chose to continue to record the asset under the cost model. The tax rate is 30 % The summarised financial statements of the entities as at 30 June 2017 is as follows: Parent Ltd Sub Ltd S Total Operating profit after tax 680,000 800,000 1,480,000 Retained earnings 1/7/16 Available for appropriation Final dividend paid Retained earnings 30/6/17 Issued capital General reserve 3,220,000 1,300,000 4,520,000 3,900,000 2,100,000 6,000,000 (500,000) 5,500,000 11,000,000 (500,000) 3,400,000 2,100,000 7,000,000 4,000,000 4.000,000 2.000,000 2000,000 12,400,000 8,100,000 20,500,000 Total Equity Liabilities (including DTLS) 1,700,000 1,600,000 100,000 Total Equities and Liabilities 14,000,000 8,200,000 22,200,000 4,700,000 1,700,000 6,400,000 Land 5,130,000 5,130,000 Investment in Sub Ltd Other assets (including DTAS) Total Assets 10,670,000 4,170,000 6,500,000 8,200,000 22,200,000 14,000,000 Required: A. Prepare the acquisition analysis as at acquisition date (1/7/2014) showing both the Parent's equity interest (PEI) and the non-controlling interest (NCI) (5 marks) B. State the amount that would be disclosed in the consolidated financial statements at 30 June 2017 for Investment in Sub Ltd and explain why (1 mark) Based on the information provided, using the proportionate goodwill method show all the consolidation journal entries, including all related tax effects, and NCI journal entries required upon consolidation as at 30 June 2017. The land has not been sold. C. (9 marks)