QUESTION

On 1 July 2014, Windy Ltd acquired 80% of the shares of Stormy Ltd and Stormy Ltd acquired 75% of the share of Rainy Ltd. All shares were acquired cum div. The equity of the companies at 1 July 2014 was as follows:

Stormy Ltd Rainy Ltd

Share capital $ 80 000 $ 60 000

Asset revaluation surplus 5 000 ---

Retained earnings 1 000 4 000

Dividend payable 8 000 5 000

At 1 July 2014, all identifiable assets and liabilities of Stormy Ltd and Rainy Ltd were recorded at fair value. No goodwill or excess arose in any of the share acquisitions.

The financial statements of the three companies at 30 June 2016 contained the following information:

Windy Ltd Stormy Ltd Rainy Ltd

Share capital $ 130 000 $ 80 000 $ 60 000

Asset revaluation surplus --- 5 000 ---

Retained earnings (1/7/15) 10 000 10 500 13 000

Dividend payable 13 000 8 000 6 000

Profit 4 000 2 000 1 500

The final dividends were declared out of profits for the year ended 30 June 2016.

Since 1 July 2014, the following intragroup transactions have occurred:

(a)Stormy Ltd sold to Rainy Ltd an item of machinery for $18 000 on 31 December 2014. The machinery had originally cost Stormy Ltd $16 000 and at the time of the sale had been depreciated to $13 200. The group charges depreciation at 10% straight-line.

(b)During the year ended 30 June 2016, inventory was transferred by Rainy Ltd to Stormy Ltd at a mark-up of 25% on cost. $4000 of this inventory is included in the inventory of Stormy Ltd as at 30 June 2016.

(c)The tax rate is 30%.

Required:

(A)Using a diagram identify the non-controlling interest in respect of the group for the year ended 30

June 2016; clearly indicating the direct and indirect non-controlling interest in the group.

(B)In respect of Windy Ltd's investment in Stormy Ltd (only) prepare the consolidation worksheet journal entries for the year ended 30 June 2016 including the non-controlling interest. Please note that there are NO marks for preparing the entries in respect of Stormy Ltd and Rainy Ltd.