QUESTION2 Consolidation with NCI

Using the information provided below you are required to undertake the consolidation for the group.

Hunter Ltd has one subsidiary, Bryan Ltd. Bryan Ltd $000

Share capital

Ordinary:Held by group 1 200

Held by other interests 800

$2 000

Information about the companies for the year ended 30 June 2008 is as follows:

HunterLtd ($000) BryanLtd ($000)

Trading profit (loss) 460 1 000

Income from investments 340 400

Profit before tax 800 1 400

Income tax expense 100 500

Profit 700 900

Dividend paid 500 500

200 400

Retained earnings (1/7/07) 6 800 3 600

Retained earnings (30/6/08) $7 000 $4 000

HunterLtd BryanLtd

$000 $000

Investments 3 608 3 000

Other non-current asset (net) 6 000 3 000

Current assets 2 392 2 000

Total assets $12 000 $8 000

Share capital $1 000 $2 000

Asset revaluation reserve 1 000 -

Retained earnings 7 000 4 000

Total equity 9 000 6 000

Liabilities 3 000 2 000

Total equity and liabilities $12 000 $8 000

Additional Information

Hunter Ltd acquired a 60% interest in Bryan Ltd on 30 June 2000 for $3008000. Bryan Ltd's shareholders' equity at 30 June 2000 was:

($000)

Share capital 2 000

Retained earnings 2 000

4 000

At the acquisition date, Bryan Ltd had no recorded goodwill. All the identifiable assets and liabilities of Bryan Ltd were recorded at fair value except the following:

Carrying amount Fair value

$000 $000

Inventory 500 600

Non-current assets (net) 1 200 1 500

The non-current assets had a further expected life of 10 years, with benefits from use being received evenly over these years. By 30 June 2007, the entire inventory had been sold by Bryan Ltd.

(i)Included in current assets of Hunter Ltd at 30 June 2008 is inventory that was purchased from Bryan Ltd for $900 000.

(ii)Included in current assets of Hunter Ltd at 30 June 2007 was inventory that was purchased from Bryan Ltd for $600 000. Bryan Ltd sells its goods at cost plus 50% mark-up.

(iii)Included in the non-current assets of Bryan Ltd at 30 June 2008 is an item of plant that was sold to Bryan Ltd by Hunter Ltd on 1 July 2007 for $1200000. At the date of sale, this asset had a carrying amount of Hunter Ltd of $1000000. It had an expected future useful life of 5 years, with benefits being received evenly over these years.

The tax rate is 20%.

Required:

A.Show the pre-acquisition analysis as at 30 June 2000. (5marks)

B.Prepare the relevant journal entries to effect the consolidation for Parent & NCI for year ending 30/6/2008. (10 marks)

C.Prepare the consolidation worksheet. (10 marks)

D.Prepare the Statement of Comprehensive Income and the Statement of Changes in Equity for the group for the year ended 30thJune 2008. (5marks)E.Prepare the Statement of Financial Position as at 30thJune 2008. (10 marks)