Question
Sydney Ltd acquired a 88% interest in Brisbane Ltd on 1 July 2014 for $955,000 On the same date, the balance of shareholders equity of
Sydney Ltd acquired a 88% interest in Brisbane Ltd on 1 July 2014 for $955,000
On the same date, the balance of shareholders equity of Brisbane Ltd comprised:
| Share capital | $250,000 |
| General reserve | $92,000 |
| Retained earnings | $144,000 |
|
| $486,000 |
All assets are recorded at their fair values except for an item of plant, which had a fair value of $508,000 and a carrying amount of $203,000 (original cost $440,000). The remaining useful life of the plant at the date of acquisition is 13 years.
The fair value of the NCI in Brisbane Ltd on 1 July 2014 was $460,000.
At 30 June 2016 & 2017 the equity balances of Brisbane Ltd are:
|
| 30/6/16 | 30/6/17 |
| Share capital | $250,000 | $250,000 |
| General reserve | $166,000 | $175,000 |
| Retained earnings | $191,000 | $211,000 |
Additional information:
Brisbane Ltd recorded a profit after tax of $33,000 for the year ended 30 June 2017 and paid a dividend of $8,000 on 1 January 2017.
On 1 July 2016, Brisbane Ltd sold inventory to Sydney Ltd for $120,000, at a profit before tax of $60,000. The entire inventory is unsold at 30 June 2017. The inventory is sold to external parties by Sydney Ltd on 15 July 2017.
The journal entries to record for Sydney Group as well as NCI at 30 June 2017 are as follows:
| Share capital | $220000 |
|
| General reserve | $80960 |
|
| Retained earnings | $126720 |
|
| BCVR | $187880 |
|
| Goodwill | $339440 |
|
| Investment in Brisbane |
| $955,000 |
|
|
|
|
| Share capital |
|
|
| General reserve |
|
|
| Retained earnings |
|
|
| BCVR |
|
|
| NCI |
|
|
|
|
|
|
| General Reserve | $8880 |
|
| Retained Earnings | $5640 |
|
| NCI |
| $14520 |
|
|
|
|
|
|
|
|
| Adjustment of opening Retained Earnings |
|
|
| Less: Plants depreciation | -46923 |
|
| Add: Tax adjustment for depreciation | 14077 |
|
| Changes in Retained Earnings | -32846 |
|
| x 12% |
| -3941 |
|
|
|
|
| Dr. NCI | $3942 |
|
| Cr. Retained Earnings |
| $3942 |
|
|
|
|
| Adjustment of Profit after Tax |
|
|
| Profit after tax (in the books of Brisbane) | 33000 |
|
| Less: Plants depreciation | aaa |
|
| Add: Tax adjustment for depreciation | bbb |
|
| Less: Intra-group inventorys unrealised profit | ccc |
|
| Add: Tax adjustment | ddd |
|
| Adjusted profit after tax | xxx |
|
| x 12% |
| -3050 |
|
|
|
|
| Dr. NCI share of profit | $-3050 |
|
| Cr. NCI |
| $-3050 |
|
|
|
|
| Dr. NCI | $960 |
|
| Cr. Dividend paid |
| $960 |
Please note that positive sign of xxx implies Dr. NCI Share of Profit and Cr. NCI and the negative sign of xxx means Dr. NCI and Cr. NCI Share of Profit
Enter the amount of aaa,bbb,ccc,ddd,xxx
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