Question 2 [30 marks]

Thor Ltd acquired its 80% interest in Loki Ltd on 30 June 2019 for $890 000, when all assets of Loki Ltd were fairly valued. Share capital and reserves of Loki Ltd are:

	At 30 June 2019	At 30 June 2020
Share Capital	$500 000	$500 000
Retained earnings	$425 000	$600 000

The management of Thor Ltd measures any non-controlling interest in Loki Ltd at fair value.

a. Prepare an acquisition analysis at 30 June 2019, to determine goodwill or gain on bargain purchase at acquisition.

	Loki Ltd	Thor Ltd 80%	NCI 20%
FV of considered transfered			-
Plus:
Less: FVINA
Share Capital
Retained earnings
Goodwill at acquisition ()

b. Prepare all consolidation/elimination journals at 30 June 2020. (5 marks)

c. Thor Ltd and Loki Ltd have the following intragroup inventory transactions:

For the financial year ending 30 June 2019:

Loki Ltd sold inventory to Thor Ltd for a price of $60,000. The inventory cost Loki Ltd $20 000 to produce. At 30 June 2019, Thor Ltd still had 40% of this inventory on hand, but by 30 June 2020, all of this inventory had been sold to external parties.

For the financial year ending 30 June 2020:

Thor Ltd sold inventory to Loki Ltd for a price of $120,000. The inventory cost Thor Ltd $80 000 to produce. By 30 June 2020, Loki Ltd had sold 75% of this inventory to external parties.

Assuming a tax rate of 30 per cent, prepare all consolidation/elimination journals related to these intragroup inventory transactions only for the year ending 30 June 2020. (12marks)

(d) i. Explain where the journals prepared above in parts (b) and (c) are processed and clearly identify why this is the case. (3 marks)

ii. AASB 3 provides preparers of financial statements with a choice in the measurement of the non- controlling interest. Which method would Thor Ltd apply when measuring its non-controlling interest in Loki Ltd if it wished to understate the total assets of the economic entity? Why? (3 marks)