Morrison Ltd owns all the shares of Scarlett Ltd. Morrison Ltd acquired the shares on 1 July 2018 at a cost of $620,000. At the acquisition date, the capital of Scarlett Ltd consisted of

100,000 ordinary shares each fully paid at $2. There were retained earnings of $20,000. All the identifiable assets and liabilities of Scarlett Ltd were recorded at amounts equal to fair value except for the following:

Patent

Land

Machinery (cost $200,000)

Carrying Amount

$20,000

$110,000

$160.000

Fair Value

$35,000

$150.000

$170.000

Patent and land had both been sold in 2019. Machinery has been depreciated at a rate of 10% a year.

Additional information:

1. Intragroup sales of inventory for the year ended 30 June 2020 was $40,000. On 30
   June 2020, inventory held by Morrison was purchased from Scarlett at a profit of $1000.
   100% of the stock is on hand
2. On 1 July 2019, inventory held by Scarlett Ltd, was purchased from Morrison in the previous year at a profit of $8000. 100% of the stock is on hand at 30 June 2020.
3. Intragroup machinery on hand on 30 June 2020:
   Morrison Ltd: purchased from Scarlett Ltd on 1 July 2019 for $20,000 at a profit of $2,000. Depreciation rate is 10% per year.
   Scarlett Ltd had purchased from Morrison Ltd an item of inventory. The carrying amount in Morrison's records at time of sale (1 Jan 2019) was $10,000 and it was sold at a profit of $3,000. The inventory is still on hand as at 30 June 2020.

Required:

Prepare all journal entries required for consolidation of Morrison Group Ltd for the year ended

30 June 2020. Show all necessary calculations. Consolidation worksheet is not required.

Answer rating: 100% (QA)

The following steps are used to prepare the journal entries required for the consolidation of Morrison Group Ltd for the year ended 30 June 2020 Conso... View the full answer