Question
MCO Ltd acquired 80% of the issued shares of PKP Ltd for $174,800 in 2018. MCO Ltd recorded a goodwill of $5,000 from the acquisition.
MCO Ltd acquired 80% of the issued shares of PKP Ltd for $174,800 in 2018. MCO Ltd recorded a goodwill of $5,000 from the acquisition.
(a) At 30 June 2020, inventory of MCO Ltd included an item sold to it by PKP Ltd for a before-tax profit of $110. This item was found to be obsolete and written off in June 2021.
(b) During the 2020–21 year, PKP Ltd had sold inventory to MCO Ltd for $28,900. The mark-up on sales was 20% on cost. At 30 June 2021, MCO Ltd still had some of this inventory on hand, amounting to items acquired from PKP Ltd for $2,400.
(c) On 29 June 2021, PKP Ltd sold plant to MCO Ltd for a before-tax profit of $2,000. This plant was carried at $3,000 (original cost $20,000) in the records of PKP Ltd at time of sale.
(d) The goodwill arising from the acquisition was impaired by $200 in the year ending 30 June 2020.
(e) Financial information provided by PKP Ltd concerning events affecting it during the 2020–21 year was as follows:
Net Profit After Tax for the year | $27,500 |
Retained earnings at 1 July 2020 | 50,000 |
77,500 | |
Dividend paid | (10,000) |
Dividend declared | (3,000) |
Transfer to general reserve | (1,500) |
14,500 | |
Retained earnings at 30 June 2021 | $63,000 |
(f) MCO Ltd and PKP Ltd depreciate their items of property, Plant & Equipment using 20% p.a. straight-line method.
(g) Tax rate is 30%.
Required
Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of MCO Ltd at 30 June 2021 in accordance to IFRS 10/AASB 10 Consolidated Financial Statements and IFRS 3/ AASB 3 Business Combinations. Workings and narrations are required.
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