The following financial information of Sub Ltd has been extracted from its financial records for the year ended 31 March 2020:

 

On 1 April 2004, Investor Ltd acquired a percentage of the equity of Sub Ltd. The identifiable net assets were considered to be fairly valued at the date of acquisition.

At the date of acquisition the equity of Sub Ltd comprised the following:
Share capital $180 000
Retained earnings     60 000
Asset revaluation surplus     80 000

Additional information:

(i) During March 2020 Sub Ltd had made sales to Investor Ltd of $9 000. The inventory sold had cost Sub Ltd $6 500. Inventory of Investor Ltd, held at 31 March 2020, included this
purchase from Sub Ltd.

(iii)  During March 2019 Investor Ltd had made sales to Sub Ltd amounting to $7 000. The Inventory sold had cost Investor Ltd $5 000. Inventory of Sub Ltd, held at 31 March 2019,
included the inventory purchased from Investor Ltd.

(iii) During the year ended 31 March 2020 Sub Ltd had incurred and paid Investor Ltd $17 000 of consulting fees.

Required:

Part A

Assume that Investor Ltd acquired 60% of the equity of Sub Ltd on 1 April 2004 and paid a cash sum of $210 000 for the acquisition.

(i) Prepare the notional journal entries, required by NZ IFRS 3 Business Combinations and NZ IFRS 10 Consolidated Financial Statements, to consolidate the financial statements of Investor Ltd (the Parent) and Sub Ltd for the year ended 3

1 March 2020.  Investor Ltd measures the non-controlling interest (NCI) at fair value. The goodwill, recognised on consolidation, was impaired by $1 000 in 2006, by $890 in 2012 and by $700 in the year ended 31 March 2020. Note: Your workings must be included on each line of your notional journal entries.

 

 

(ii) Post the notional journal entries prepared in (i) to the consolidated worksheet in the answer booklet.

 

(iii) Prepare the Group Statement of Financial Position as at 31 March 2020.

 

Assume Investor Ltd measures the non-controlling interest (NCI) at the proportionate share in the recognised amounts of the subsidiary’s identifiable net assets.

 

(ii) Determine the Group amount for the equity account NCI and the Goodwill asset.

 

(iii) Paragraph 19 of NZ IFRS 3 Business Combinations provides a choice of measurement for the non-controlling interest (NCI) in the acquiree. Explain the differences between measuring the NCI at fair value and the alternative measurement basis.

Transcribed Image Text:

Sales Cost of Sales Gross profit Dividend income Consulting fee income Expenses Profit before taxation Income tax expense Profit after taxation Retained earnings - opening balance Dividends declared Retained earnings - closing balance Equity and liabilities Share capital Retained earnings Asset revaluation surplus Dividend payable Various liabilities Assets Various assets Accounts receivable Inventory Sub Ltd $780 000 324 000 456 000 358 000 98.000 39 200 58 800 290 000 20 000 $328 800 180 000 328 800 90 000 14 000 207 200 $820 000 736 000 48 000 36.000 $820 000 Sales Cost of Sales Gross profit Dividend income Consulting fee income Expenses Profit before taxation Income tax expense Profit after taxation Retained earnings - opening balance Dividends declared Retained earnings - closing balance Equity and liabilities Share capital Retained earnings Asset revaluation surplus Dividend payable Various liabilities Assets Various assets Accounts receivable Inventory Sub Ltd $780 000 324 000 456 000 358 000 98.000 39 200 58 800 290 000 20 000 $328 800 180 000 328 800 90 000 14 000 207 200 $820 000 736 000 48 000 36.000 $820 000