QUESTION 3

On 1 July 2022, Pitt Ltd acquired 80% of the issued shares of Bourke Ltd for $500 000. The equity of Bourke Ltd at this date consisted of:

Share capital	$400000
Retained earnings	120000

The carrying amounts and fair values of the assets and liabilities recorded by Bourke Ltd at 1 July 2022 were as follows.

	Carrying amount					Fair value
Inventories	$	80000				$	84000
Plant & Equipment		100000					130000

All of the inventories on hand at 1 July 2022 were still on hand at 30 June 2023 and sold in full by 30 June 2024. The fittings and machinery have a further 5-year life beyond 1 July 2022, with benefits to be received evenly over this period.

In the 2 years since acquisition, Bourke Ltd has recorded the following annual results and declared dividends.

	Profit (loss)after tax				Dividends
30 June 2023	$	15000			$	0
30 June 2024		20000				10000

Pitt Ltd uses the partial goodwill method.

The tax rate is 30%.

Required

1. Prepare the acquisition analysis for Bourke Ltd at acquisition date, calculating the Non-Controlling Interest.

[3 marks]

2. Prepare the journal entries to recognise non-controlling interest in profit and post-acquisition equity a year after acquisition at 30 June 2023.

[4 marks]

3. Explain how the journal entries at 30 June 2024 would differ to those prepared at 30 June 2023 in part 3b. for non-controlling interest in profit and post-acquisition equity.

[3 marks]

[Question 3 = 10 marks]