On 1st July 20X7 Parent Ltd acquired all of the share capital of Controlled Ltd
ID: 2511184 • Letter: O
Question
On 1st July 20X7 Parent Ltd acquired all of the share capital of Controlled Ltd for $487,500.
As that date equity of Controlled Ltd was:
Share Capital $300,000
General Reserve $60,000
Retained Earnings $70,000
Consolidation worksheet 30 June 20X2
Dr./Cr
Parent
Ltd
Controlled Ltd
Elimination
Consolidated Statement
Dr
Cr
Sales
Cr
4,000,000
2,200,000
Cost of goods sold
Dr
2,300,000
1,000,000
Gross profit
Cr
1,700,000
1,200,000
Dividend from Controlled Ltd
Cr
30,000
Profit from sale of plant
Cr
6,000
Interest from Controlled Ltd
Cr
11,000
1,741,000
1,206,000
Selling expenses
Dr
121,500
86,000
Administrative expenses
Dr
400,000
250,000
Financial expenses
Dr
362,000
220,000
Profit before tax
Cr
857,500
650,000
Less: Income tax
Dr
340,000
260,000
Profit
Cr
517,500
390,000
Retained earnings 1-07-20X8
Cr
400,000
250,000
Available
917,500
640,000
Less Appropriation:
Interim dividend paid
Dr
60,000
30,000
Declared dividend
Dr
90,000
45,000
To General reserve
Dr
5,000
Total appropriation
Dr
150,000
80,000
Retained earnings 30-06-20X9
Cr
767,500
560,000
Share capital
Cr
600,000
300,000
General reserve
Cr
240,000
100,000
Dividend payable
Cr
90,000
45,000
Current tax payable
Cr
340,000
260,000
Payable
Cr
112,500
25,000
Non-current liabilities
Cr
200,000
60,000
2,350,000
1,350,000
Land and building
Dr
450,000
250,000
Motor vehicle (net)
Dr
130,000
60,000
Plant and equipment (net)
Dr
500,000
400,000
Investment in Controlled Ltd
Dr
457,500
-
Receivable
Dr
200,000
300,000
Inventory
Dr
300,000
150,000
Bank
Dr
312,500
190,000
Goodwill on consolidation
Dr
-
-
Accumulated impairment-goodwill
Dr
-
-
2,350,000
1,350,000
Additional Information:
- Sales by Controlled Ltd to Parent Ltd were $60,000
- Unrealized profit in the opening inventory of Controlled Ltd for goods sold by Parent Ltd was $2,000.
- Unrealized profit in the closing inventory of Parent Ltd for goods sold by Controlled Ltd was $4,000
- On 1st July, 20X8 Controlled Ltd sold plant to Parent Ltd for $60,000. At the date of sale the plant had a written-down value of $54,000. Parent Ltd depreciates plant at 10% per annum on cost using the straight-line method.
- Impairment of goodwill:
Year ended 30 June 20X8 $5,500
Year ended 30 June 20X9 $5,500
Required: For year ended 30 June, 20X9
a. Consolidation journal entries
b. The consolidation worksheet, and
c. Consolidated financial statement
Consolidation worksheet 30 June 20X2
Dr./Cr
Parent
Ltd
Controlled Ltd
Elimination
Consolidated Statement
Dr
Cr
Sales
Cr
4,000,000
2,200,000
Cost of goods sold
Dr
2,300,000
1,000,000
Gross profit
Cr
1,700,000
1,200,000
Dividend from Controlled Ltd
Cr
30,000
Profit from sale of plant
Cr
6,000
Interest from Controlled Ltd
Cr
11,000
1,741,000
1,206,000
Selling expenses
Dr
121,500
86,000
Administrative expenses
Dr
400,000
250,000
Financial expenses
Dr
362,000
220,000
Profit before tax
Cr
857,500
650,000
Less: Income tax
Dr
340,000
260,000
Profit
Cr
517,500
390,000
Retained earnings 1-07-20X8
Cr
400,000
250,000
Available
917,500
640,000
Less Appropriation:
Interim dividend paid
Dr
60,000
30,000
Declared dividend
Dr
90,000
45,000
To General reserve
Dr
5,000
Total appropriation
Dr
150,000
80,000
Retained earnings 30-06-20X9
Cr
767,500
560,000
Share capital
Cr
600,000
300,000
General reserve
Cr
240,000
100,000
Dividend payable
Cr
90,000
45,000
Current tax payable
Cr
340,000
260,000
Payable
Cr
112,500
25,000
Non-current liabilities
Cr
200,000
60,000
2,350,000
1,350,000
Land and building
Dr
450,000
250,000
Motor vehicle (net)
Dr
130,000
60,000
Plant and equipment (net)
Dr
500,000
400,000
Investment in Controlled Ltd
Dr
457,500
-
Receivable
Dr
200,000
300,000
Inventory
Dr
300,000
150,000
Bank
Dr
312,500
190,000
Goodwill on consolidation
Dr
-
-
Accumulated impairment-goodwill
Dr
-
-
2,350,000
1,350,000
Explanation / Answer
Income statement.
Consolidation worksheet 30 June 20X2
Dr./Cr
Parent
Controlled Ltd
Elimination
Consolidated Statement
Remarks
Ltd
Income
Sales
Cr
40,00,000
22,00,000
-66000
61,34,000
Adjustment 4
Cost of goods sold
Dr
23,00,000
10,00,000
-62000
32,38,000
Adjustment 4
Gross profit
Cr
17,00,000
12,00,000
28,96,000
4,000
Other Income
Dividend from Controlled Ltd
Cr
30,000
-30000
-
Adjustment 1
Profit from sale of plant
Cr
6,000
-6000
-
Adjustment 2
Interest from Controlled Ltd
Cr
11,000
-11000
-
Adjustment 3
Total
17,41,000
12,06,000
28,96,000
Expenses
Selling expenses
Dr
1,21,500
86,000
2,07,500
Administrative expenses
Dr
4,00,000
2,50,000
6,50,000
Financial expenses
Dr
3,62,000
2,20,000
-600
-11000
5,70,400
Adjustment 3 & 2
Profit before tax
Cr
8,57,500
6,50,000
14,68,100
Less: Income tax
Dr
3,40,000
2,60,000
6,00,000
Profit
Cr
5,17,500
3,90,000
8,68,100
Retained earnings 1-07-20X8
Cr
4,00,000
2,50,000
6,50,000
Available
9,17,500
6,40,000
15,18,100
Less Appropriation:
Interim dividend paid
Dr
60,000
30,000
-30000
60,000
Adjustment 1
Declared dividend
Dr
90,000
45,000
1,35,000
To General reserve
Dr
5,000
5,000
Total appropriation
Dr
1,50,000
80,000
2,00,000
Retained earnings 30-06-20X9
Cr
7,67,500
5,60,000
0
0
13,18,100
Balance Sheet
Share capital
Cr
6,00,000
3,00,000
-300000
6,00,000
General reserve
Cr
2,40,000
1,00,000
-100000
2,40,000
Retained Earning
7,67,500
5,60,000
0
13,18,100
Dividend payable
Cr
90,000
45,000
1,35,000
Current tax payable
Cr
3,40,000
2,60,000
6,00,000
Payable
Cr
1,12,500
25,000
1,37,500
Non-current liabilities
Cr
2,00,000
60,000
2,60,000
23,50,000
13,50,000
32,90,600
Land and building
Dr
4,50,000
2,50,000
7,00,000
Motor vehicle (net)
Dr
1,30,000
60,000
1,90,000
Plant and equipment (net)
Dr
5,00,000
4,00,000
-5400
8,94,600
Adjustment 2
Investment in Controlled Ltd
Dr
4,57,500
0
-457500
0
Receivable
Dr
2,00,000
3,00,000
5,00,000
Inventory
Dr
3,00,000
1,50,000
53500
5,03,500
Adjustment of Unrealised profit in Closing Stock
Bank
Dr
3,12,500
1,90,000
5,02,500
Goodwill on consolidation
Dr
0
0
0
Accumulated impairment-goodwill
Dr
0
0
0
23,50,000
13,50,000
32,90,600
0
0
0
Depreciation on Excess cost of plant
01-07-2018
Date of sale
30-06-2019
Reporting date
10%
Depreciation Rate
6000
Depreciation Claim by Parent during the year.
6000
Profit on sale
54000
Actual Cost
5400
Actual Depreciation
54000X10%
600
Excess Claim
6000-5400
Entries for Adjustment.
Adjustment 1.
Dividend Income Amount $30,000
Dividend Income (parent) Dr
30,000
To Interim Divident (controlled ltd)
30,000
Adjustment 2.
Interest Income Amount $11,000
Interest Income (parent) Dr
11,000
To Finance Exp (controlled ltd)
11,000
Adjustment 3.
Profit on Sale of Plant $6,000
Profit on sale of Plant (Controlled) Dr
6,000
To Plant & Mach
5,400
To Depreciation
600
Adjustment 4.
Sale to Parent Company
Sale Account (controlled) Dr
60,000
To Cost of Good Sold
60,000
Adjustment 5.
Adjustment of Unrealised Profit in Stock
Sale Dr (controlled)
4,000
To Closing Stock (parent)
4,000
Sale Dr (controlled)
2,000
To Cost of Good Sold (Parent)
2,000
Income statement.
Consolidation worksheet 30 June 20X2
Dr./Cr
Parent
Controlled Ltd
Elimination
Consolidated Statement
Remarks
Ltd
Income
Sales
Cr
40,00,000
22,00,000
-66000
61,34,000
Adjustment 4
Cost of goods sold
Dr
23,00,000
10,00,000
-62000
32,38,000
Adjustment 4
Gross profit
Cr
17,00,000
12,00,000
28,96,000
4,000
Other Income
Dividend from Controlled Ltd
Cr
30,000
-30000
-
Adjustment 1
Profit from sale of plant
Cr
6,000
-6000
-
Adjustment 2
Interest from Controlled Ltd
Cr
11,000
-11000
-
Adjustment 3
Total
17,41,000
12,06,000
28,96,000
Expenses
Selling expenses
Dr
1,21,500
86,000
2,07,500
Administrative expenses
Dr
4,00,000
2,50,000
6,50,000
Financial expenses
Dr
3,62,000
2,20,000
-600
-11000
5,70,400
Adjustment 3 & 2
Profit before tax
Cr
8,57,500
6,50,000
14,68,100
Less: Income tax
Dr
3,40,000
2,60,000
6,00,000
Profit
Cr
5,17,500
3,90,000
8,68,100
Retained earnings 1-07-20X8
Cr
4,00,000
2,50,000
6,50,000
Available
9,17,500
6,40,000
15,18,100
Less Appropriation:
Interim dividend paid
Dr
60,000
30,000
-30000
60,000
Adjustment 1
Declared dividend
Dr
90,000
45,000
1,35,000
To General reserve
Dr
5,000
5,000
Total appropriation
Dr
1,50,000
80,000
2,00,000
Retained earnings 30-06-20X9
Cr
7,67,500
5,60,000
0
0
13,18,100
Balance Sheet
Share capital
Cr
6,00,000
3,00,000
-300000
6,00,000
General reserve
Cr
2,40,000
1,00,000
-100000
2,40,000
Retained Earning
7,67,500
5,60,000
0
13,18,100
Dividend payable
Cr
90,000
45,000
1,35,000
Current tax payable
Cr
3,40,000
2,60,000
6,00,000
Payable
Cr
1,12,500
25,000
1,37,500
Non-current liabilities
Cr
2,00,000
60,000
2,60,000
23,50,000
13,50,000
32,90,600
Land and building
Dr
4,50,000
2,50,000
7,00,000
Motor vehicle (net)
Dr
1,30,000
60,000
1,90,000
Plant and equipment (net)
Dr
5,00,000
4,00,000
-5400
8,94,600
Adjustment 2
Investment in Controlled Ltd
Dr
4,57,500
0
-457500
0
Receivable
Dr
2,00,000
3,00,000
5,00,000
Inventory
Dr
3,00,000
1,50,000
53500
5,03,500
Adjustment of Unrealised profit in Closing Stock
Bank
Dr
3,12,500
1,90,000
5,02,500
Goodwill on consolidation
Dr
0
0
0
Accumulated impairment-goodwill
Dr
0
0
0
23,50,000
13,50,000
32,90,600
0
0
0
Depreciation on Excess cost of plant
01-07-2018
Date of sale
30-06-2019
Reporting date
10%
Depreciation Rate
6000
Depreciation Claim by Parent during the year.
6000
Profit on sale
54000
Actual Cost
5400
Actual Depreciation
54000X10%
600
Excess Claim
6000-5400
Entries for Adjustment.
Adjustment 1.
Dividend Income Amount $30,000
Dividend Income (parent) Dr
30,000
To Interim Divident (controlled ltd)
30,000
Adjustment 2.
Interest Income Amount $11,000
Interest Income (parent) Dr
11,000
To Finance Exp (controlled ltd)
11,000
Adjustment 3.
Profit on Sale of Plant $6,000
Profit on sale of Plant (Controlled) Dr
6,000
To Plant & Mach
5,400
To Depreciation
600
Adjustment 4.
Sale to Parent Company
Sale Account (controlled) Dr
60,000
To Cost of Good Sold
60,000
Adjustment 5.
Adjustment of Unrealised Profit in Stock
Sale Dr (controlled)
4,000
To Closing Stock (parent)
4,000
Sale Dr (controlled)
2,000
To Cost of Good Sold (Parent)
2,000
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