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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 xxx

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