Question 3 Consolidation with Non-controlling Interest

On the 1 July 2022 Beninbra Limited acquired 60% of the shares of Indigoo Limited for $780,000. At this date the equity of Indigoo Limited consisted of the following:

	$
Share capital	900,000
General reserve	50,000
Retained earnings	195,000

At acquisition, Indigoo Limited had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the following assets:

	Carrying amount $	Fair value $
Building (cost $750,000)	450,000	480,000
Plant (cost $819,000)	573,300	560,000
Land	600,000	750,000
Inventories	76,800	67,800

Additional details about the revalued assets.

The building's useful life was 20 years. The building will be depreciated on a straight-line basis over the remaining life.

The plant's original useful life was 10 years and will continue to be depreciated the same rate on a straight-line basis over the remaining useful life of 7 years.

All the inventory revalued at acquisition was on-sold in July 2022.

The financial statement information of both entities on 30 June 2023 is provided below and included in the excel file available in the I2 site.

	Beninbra Ltd	Indigoo Ltd
	$	$
Sales revenue	3,329,600	2,077,440
Other revenue	153,600	167,936
Total revenue	3,483,200	2,245,376
Cost of sales	(2,100,000)	(1,187,840)
Other expenses	(876,000)	(331,776)
Total expenses	(2,976,000)	(1,519,616)
Profit before tax	507,200	725,760
Tax expense	(76,800)	(81,920)
Profit for the period	430,400	643,840
Retained earnings at 1 July 2022	1,256,000	422,880
Transfer from general reserve		15,000
Dividend paid	(51,200)	(30,720)
Dividend declared	(76,800)	(15,360)
Retained earnings at 30 June 2023	1,558,400	1,035,640
Share capital	1,024,000	900,000
General reserve		35,000
Total equity	2,582,400	1,970,640
Provisions	102,400	85,800
Payables	76,800	102,400
Deferred tax liabilities	30,720	38,400
Noncurrent liabilities	1,302,480	1,226,400
Total liabilities	1,512,400	1,453,000
Total equity and liabilities	4,094,800	3,423,640
Cash	224,304	74,640
Receivables	203,936	93,920
Inventories	254,800	76,800
Shares in Parsons Ltd	780,000
Building	1,680,000	750,000
Accumulated depreciation building	(924,000)	(300,000)
Plant	2,048,000	819,000
Accumulated depreciation plant	(1,392,640)	(307,200)
Land	900,000	600,000
Motor vehicles	150,000	75,000
Accumulated depreciation - motor vehicles	(60,000)	(15,000)
Intangible assets	192,000	1,536,000
Deferred tax assets	38,400	20,480
Total assets	4,094,800	3,423,640

2022-2023 events

Indigoo Limited sold inventory to Beninbra Limited for $17,000 in May. The inventory had cost Indigoo $14,000, 20% of the inventory was still held as at 30 June 2023.

Beninbra Limited sold inventory to Indigoo Limited for $4,000 profit In January. The inventory cost Beninbra $20,000. All the inventory has been on sold by Indigoo.

On 30/6/2023, Indigoo Limited sold a motor vehicle that cost $60,000 for a gain of $2,000 to Beninbra Limited. The vehicle has a further useful life of 4 years and is depreciated at 20%.

On 30 June 2023, Beninbra invoiced Indigoo Limited $50,000 for management consulting. Beninbra did not pay the invoice until 15 July 2023.

In January Indigoo paid its shareholders $30,720. Then in June they declared a dividend of $15,360.

On 1 April 2023, Beninbra Limited lent $200,000 to Indigoo Limited, at an interest rate of 4% per year. Interest is payable on the last day of every quarter, starting 30 June 2023

Required

a. Use the full goodwill method to determine if there is any goodwill or gain on bargain purchase arises from the acquisition made by Beninbra Ltd. The fair value of the non-controlling interest on 1 July 2022 was $495,719. (2 marks)

b. Use the partial goodwill method to determine if there is any goodwill or gain on bargain purchase. (2 marks)

c. Using the partial goodwill or gain on bargain purchase calculation from (b), prepare the following journal entries in relation to the preparation of the consolidated financial statements of Beninbra Ltd as at 1 July 2022:

1. Business combination valuation entries (explain/narrate your answers). (4marks)

2. Pre-acquisition elimination entries, including workings. (1 mark)

3. Entries showing non-controlling interest's share of equity on 1 July 2021. (1mark)

d. Prepare the following journal entries in relation to the preparation of the consolidated financial statements of Beninbra Ltd as at 30 June 2023:

1. Business combination valuation entries (explain/narrate your answers). (3marks)

2. Pre-acquisition elimination entries. Including workings. (1 mark)

3. Entries showing non-controlling interests' share of equity on 1 July 2022. (1mark)

4. Entries showing non-controlling interest's share of equity from 1 July 2022 to 30 June 2023, show workings. (2 marks)

5. Intragroup elimination entries. (8 marks)

e. Prepare the consolidation worksheet using entries from d. (5 marks)

f. Use the consolidated worksheet from e. to prepare the following consolidated financial statements for the year ended 30 June 2023:

1. Statement of comprehensive income. (1 mark)

2. Statement of financial position. (3 marks)

3. Statement of changes in equity.

Please provide a complete answer