Required:

Question 5

On 1 July 2017, Alpha Ltd. acquired 80% of the share capital (cum-div) of Beta Ltd. for $644,000. On that date, the shareholders equity of Beta Ltd. comprised the following:

Share Capital (100,000 shares) $400,000

Retained Earnings 150,000

General Reserve 50,000

At acquisition date, the liabilities of Beta Ltd. included a dividend payable of $80,000, which was subsequently paid on 15 October 2017.

At 1 July 2017, all the assets and liabilities of Beta Ltd. were recorded at amounts equal to fair value except for land and plant.

	Carrying amount	Fair value
Land	$290,000	$320,000
Plant (cost $200 000)	160 000	180,000

The remaining useful life of the plant at the date of acquisition was 5 years.

On 1 January 2018, Alpha Ltd. sold an item of inventory to Beta Ltd. at a profit of $50,000 before tax. Beta Ltd. records this asset as equipment and applies a 10% straight line depreciation method.

On 1 July 2018, Alpha Ltd. loaned $100,000 to Beta Ltd. at a variable interest rate of 10% per annum. Accrued interest has been recorded, but only half of the interest was paid by the end of June 2019. No amounts of principal have been repaid on the loan.

During the financial year ended 30 June 2019, Beta Ltd. sold goods to Alpha Ltd. that cost $50,000 for $60,000. At 30 June 2019, 60% of the goods was sold to Hope Ltd.

For the year ended 30 June 2019, the operating profit after tax of Beta Ltd. was $100,000. At 30 June 2018 the balance in retained earnings of Beta Ltd. was $230,000.

The tax rate is 30%. Alpha Ltd. satisfied the requirements of AASB 10 regarding capacity to control Beta Ltd. during the required period, and applies the partial goodwill method.

Prepare consolidation adjustments, including any non-controlling interest, in consolidation journal form according to AASB 10 Consolidated Financial Statements as at 30 June 2019. Show all workings including the acquisition analysis.