Large Ltd owns 100% of the shares of Small Ltd. These shares were acquired on 1 July
Question:
Large Ltd owns 100% of the shares of Small Ltd. These shares were acquired on 1 July 2019 for $1 million when the shareholders’ funds of Small Ltd were:
Share capital | $500,000 |
Retained earnings | $400,000 |
$900,000 |
All assets of Small Ltd were fairly stated at acquisition date, except for a land that had a fair value $50000 more than carrying value.
During the 2019/2020 financial year, Small Ltd sold inventory to Large Ltd at a sales price of $200,000. The inventory cost Small Ltd $120,000 to produce. At 30 June 2010 half of the stock was still on hand with Large Ltd. In addition, Small Ltd paid an interim dividend of $40,000 out of post-acquisition profits to Large Ltd during the 2009/2010 financial year. The tax rate is 30%.
Based on the above information, prepare the consolidation journal entries that Large Ltd will need to pass on 30 June 2020.
Financial Accounting and Reporting
ISBN: 978-0273744443
14th Edition
Authors: Barry Elliott, Jamie Elliott