Question 3 Part A (ii) Investor Ltd Consolidation Worksheet as at 31 March 2020 Parent Ltd Sub Ltd Dr Cr Group Sales $1 531 000 $780 000 Cost of goods sold 648 000 324 000 883 000 456 000 Gross profit Dividend income 12 000 Consulting fee income Expenses 17 000 716 000 358 000 Profit before taxation 196 000 98 000 Income tax expense 78 400 39 200 Profit after taxation 117 600 58 800 Less the NCI share of PAT Retained profits - opening 590 000 290 000 Dividends declared 50 000 20 000 Balance Sheet items: 657 600 328 800 Retained profits - closing Share capital 370 000 180 000 Asset revaluation surplus 152 000 90 000 NCI Dividend payable 14 000 Various liabilities 39 000 421 000 $1 639 600 207 200 $820 000 Total equity and liabilities Various assets 1 237 200 736 000 Accounts receivable 102 000 48 000 Dividend receivable 8 400 Inventory 82 000 36 000 Investment in Sub Ltd 210 000 Goodwill Total assets $1 639 600 $820 000 Question 3 continued: (111) During the year ended 31 March 2020 Sub Ltd had incurred and paid Investor Ltd $17 000 of consulting fees. Required: Part A Assume that Investor Ltd acquired 60% of the equity of Sub Ltd on 1 April 2004 and paid a cash sum of $210 000 for the acquisition. (1) Prepare the notional journal entries, required by NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements, to consolidate the financial statements of Investor Ltd (the Parent) and Sub Ltd for the year ended 31 March 2020. Investor Ltd measures the non-controlling interest (NCI) at fair value. The goodwill, recognised on consolidation, was impaired by $1 000 in 2006, by $890 in 2012 and by $700 in the year ended 31 March 2020. The following financial information of Sub Ltd has been extracted from its financial records for the year ended 31 March 2020: Sub Ltd Sales $780 000 Cost of Sales 324 000 Gross profit 456 000 Dividend income Consulting fee income Expenses 358 000 Profit before taxation 98 000 Income tax expense 39 200 Profit after taxation 58 800 Retained earnings - opening balance 290 000 Dividends declared 20 000 Retained earnings closing balance $328 800 Equity and liabilities Share capital Retained earnings Asset revaluation surplus Dividend payable Various liabilities 180 000 328 800 90 000 14 000 207 200 $820 000 Assets Various assets Accounts receivable Inventory 736 000 48 000 36 000 $820 000 On 1 April 2004, Investor Ltd acquired a percentage of the equity of Sub Ltd. The identifiable net assets were considered to be fairly valued at the date of acquisition. At the date of acquisition the equity of Sub Ltd comprised the following: Share capital $180 000 Retained earnings 60 000 Asset revaluation surplus 80 000 Additional information: (1) During March 2020 Sub Ltd had made sales to Investor Ltd of $9 000. The inventory sold had cost Sub Ltd $6 500. Inventory of Investor Ltd, held at 31 March 2020, included this purchase from Sub Ltd. (111) During March 2019 Investor Ltd had made sales to Sub Ltd amounting to $7 000. The Inventory sold had cost Investor Ltd $5 000. Inventory of Sub Ltd, held at 31 March 2019, included the inventory purchased from Investor Ltd. Question 3 Part A (111) Investor Ltd Group Statement of Financial Position as at 31 March 2020 S S Current assets: Non-current assets: Total assets Current liabilities: Non-current liabilities: Total liabilities Equity: Total liabilities and equity Question 3 Part A (ii) Investor Ltd Consolidation Worksheet as at 31 March 2020 Parent Ltd Sub Ltd Dr Cr Group Sales $1 531 000 $780 000 Cost of goods sold 648 000 324 000 883 000 456 000 Gross profit Dividend income 12 000 Consulting fee income Expenses 17 000 716 000 358 000 Profit before taxation 196 000 98 000 Income tax expense 78 400 39 200 Profit after taxation 117 600 58 800 Less the NCI share of PAT Retained profits - opening 590 000 290 000 Dividends declared 50 000 20 000 Balance Sheet items: 657 600 328 800 Retained profits - closing Share capital 370 000 180 000 Asset revaluation surplus 152 000 90 000 NCI Dividend payable 14 000 Various liabilities 39 000 421 000 $1 639 600 207 200 $820 000 Total equity and liabilities Various assets 1 237 200 736 000 Accounts receivable 102 000 48 000 Dividend receivable 8 400 Inventory 82 000 36 000 Investment in Sub Ltd 210 000 Goodwill Total assets $1 639 600 $820 000 Question 3 continued: (111) During the year ended 31 March 2020 Sub Ltd had incurred and paid Investor Ltd $17 000 of consulting fees. Required: Part A Assume that Investor Ltd acquired 60% of the equity of Sub Ltd on 1 April 2004 and paid a cash sum of $210 000 for the acquisition. (1) Prepare the notional journal entries, required by NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements, to consolidate the financial statements of Investor Ltd (the Parent) and Sub Ltd for the year ended 31 March 2020. Investor Ltd measures the non-controlling interest (NCI) at fair value. The goodwill, recognised on consolidation, was impaired by $1 000 in 2006, by $890 in 2012 and by $700 in the year ended 31 March 2020. The following financial information of Sub Ltd has been extracted from its financial records for the year ended 31 March 2020: Sub Ltd Sales $780 000 Cost of Sales 324 000 Gross profit 456 000 Dividend income Consulting fee income Expenses 358 000 Profit before taxation 98 000 Income tax expense 39 200 Profit after taxation 58 800 Retained earnings - opening balance 290 000 Dividends declared 20 000 Retained earnings closing balance $328 800 Equity and liabilities Share capital Retained earnings Asset revaluation surplus Dividend payable Various liabilities 180 000 328 800 90 000 14 000 207 200 $820 000 Assets Various assets Accounts receivable Inventory 736 000 48 000 36 000 $820 000 On 1 April 2004, Investor Ltd acquired a percentage of the equity of Sub Ltd. The identifiable net assets were considered to be fairly valued at the date of acquisition. At the date of acquisition the equity of Sub Ltd comprised the following: Share capital $180 000 Retained earnings 60 000 Asset revaluation surplus 80 000 Additional information: (1) During March 2020 Sub Ltd had made sales to Investor Ltd of $9 000. The inventory sold had cost Sub Ltd $6 500. Inventory of Investor Ltd, held at 31 March 2020, included this purchase from Sub Ltd. (111) During March 2019 Investor Ltd had made sales to Sub Ltd amounting to $7 000. The Inventory sold had cost Investor Ltd $5 000. Inventory of Sub Ltd, held at 31 March 2019, included the inventory purchased from Investor Ltd. Question 3 Part A (111) Investor Ltd Group Statement of Financial Position as at 31 March 2020 S S Current assets: Non-current assets: Total assets Current liabilities: Non-current liabilities: Total liabilities Equity: Total liabilities and equity