QUESTION 5

Large Parent Ltd acquired 70% of the equity in Sub Ltd on 1 April 2006. At that date, the equity of Sub Ltd was comprised of Share capital of $4 500 and Retained earnings of $ 2 300. Sub Ltd uses the cost model for its property, plant and equipment (PPE).

On the 1 April 2006:

- the fair value of the PPE was $490 greater than the cost.

- there was a contingent liability of $96.

The general ledger balances for the year ended 31 March 2022 are provided below.

	Large Parent Ltd	Sub Ltd
Income statement/dividend items:	$	$
Income (all types)	14 700	10 200
Less: Expenses (all types)	8 200	5 750
Profit before tax	6 500	4 450
Less: Income tax expense	2 425	1 200
Profit after tax	4 075	3 250
Retained earnings opening balance	6 000	3 800
Less: Dividends declared	3 000	2 500
Balance Sheet items:
Retained earnings closing balance	7 075	4 550
Share capital	10 250	4 500
Various liabilities	17 925	3 115
Loan payable to Parent Ltd	-	1 250
Interest payable to Parent Ltd	-	15
Total equity and liabilities	$35 250	$13 430
Various current assets	2 785	1 000
Inventory	600	430
Interest receivable	15	-
PPE	25 000	12 000
Loan receivable	1 250	-
Investment in Sub Ltd	5 600	-
Total assets	$35 250	$13 430

Question 5 continued:

Large Parent Ltd provided you with the following information:

In March 2021, Sub Ltd made sales to Large Parent Ltd of $80 and recognised a profit of $34. Large Parent Ltd sold this purchase of inventory to Robert Ltd during April 2021.

• In March 2022, Sub Ltd made sales to Large Parent Ltd of $97. The inventory sold cost Sub Ltd $54. On 31 March 2022, the inventory Large Parent Ltd had on hand did not include this purchase from Sub Ltd.

• Sub Ltd borrowed $1 250 from Parent Ltd. The total interest for the financial year ended 31 March 2022 of $48 has been recognised, but $15 remains to be paid by Sub Ltd.

The directors decided to measure the non-controlling interest (NCI) at fair value.

Required:( Answer the question in the format attached below).

(a) State the Group dollar amount, for the items listed in the answer booklet, that would have been determined in the consolidated worksheet group column for the year ended 31 March 2022.

(b) Explain why the Group goodwill dollar amount will equal a 100% acquisition analysis calculated amount.

(c) Explain your 2022 consolidation treatment of the sale of inventory from Sub Ltd to Large Parent Ltd during March 2021.

(a) State the Group dollar amount, for the items listed below, that would have been determined in the consolidated worksheet group column for the year ended 31 March (b) Explain why the Group goodwill dollar amount will equal a 100% acquisition analysis calculated amount. (c) Explain your 2022 consolidation treatment of the sale of inventory from Sub Ltd to Large Parent Lte during March 2021. (a) State the Group dollar amount, for the items listed below, that would have been determined in the consolidated worksheet group column for the year ended 31 March (b) Explain why the Group goodwill dollar amount will equal a 100% acquisition analysis calculated amount. (c) Explain your 2022 consolidation treatment of the sale of inventory from Sub Ltd to Large Parent Lte during March 2021