Question

Suva Ltd acquired all issued share capital of Lautoka Ltd on 1 July 2011 for a cash paymet of $885,000. It is the only subsidiary of Suva Ltd and share capital and reserves of Lautoka Ltd at date of acquisition were:

Share Capital $598,000

Retained Earnings $102,000

Revaluation Surplus 50,000

At date of acquisition, all assets of Lautoka Ltd were at fair value, other than the property, plant and equipment which had a fair value of $250,000. The cost of the property, plant and equipment was $328,000 and it had accumulated depreciation of $178,000. The property, plant and equipment were expected to have a remaining useful life of eight years. At the date of acquisition, the notes to Lautoka Ltds financial statements identify a contingent liability related to an unsettled legal claim with a fair value of $10,000 which would be tax deductible when paid. On 1 May 2012, the liability relating to the legal claim was settled and paid in full. There were no intra-group transactions between Suva Ltd and Lautoka Ltd between 1 July 2011 and 30 June 2014.

1 March 2015, Lautoka Ltd sold equipment to Suva Ltd for $43,200 when its carrying value in Lautoka's books was $36,000 (original cost $60,000 and original estimated life of ten years) There were no other intra-group transactions between Suva Ltd and Lautoka Ltd for year ended 30 June 2015.

1 June 2016 Suva Ltd sold plant to Lautoka Ltd for $74,240 when its carrying value and original cost in Suva's book was $80,000 and estimated remaining useful life was 4 years. There were no other intra-group transactions between Suva Ltd and Lautoka Ltd for the year ended 30 June 2016.

During year 2017, Suva Ltd made sales of inventory to Lautoka Ltd for on sale t exteral parties. The inventory had originally cost Suva Ltd $26,000. At the year end, Lautoka Ltd still had a quarter of the inventory on hand. On hand inventry was expected to be sold in the following financial period. There were no other intra-group transactions between Suva Ltd and Lautoka Ltd for the year ended 30 June 2017.

During year 2018, Lautoka Ltd made sales of inventory to Suva Ltd for on sale to external parties. The inventory had originally cost Lautoka Ltd $28,000. All intra-group inventories were sold in 2018. Suva Ltd provided management services to Lautoka Ltd in 2018. Lautoka Ltd paid $5,000 for those services and has a balance of $1,000 for management fees payable at the year end. Lautoka Ltd declared and paid dividend of $10,000 at the year end 2018. There were no other intra-group transactions between Suva Ltd and Lautoka Ltd for the year ended 30 June 2018.

• All revaluation adjustment on acquisition are made on consolidation only
• All plants are depreciated using the straight-line method with no residual value.
• Intra-group sales of inventory to be at a mark up of 10% on cost.
• All calculations to be rounded to the nearest whole dollar.
• Company tax rate is 30%
• Journal narrations are required

Required:

1. An acquisition analysis and all adjustment/elimination journal entries for consolidation at acquisition, 1 July 2011.
2. An adjustment/elimination journal entries for consolidation as at 30 June 2012.
3. All adjustment/elimination journal entries for consolidation as at 30 June 2017.
4. All adjustment/elimination journal entries for consolidation as at 30 June 2018.