On 1 July 2018, Parent Ltd acquired 80% of the ordinary voting shares of Child Ltd which
Question:
On 1 July 2018, Parent Ltd acquired 80% of the ordinary voting shares of Child Ltd which in turn acquired 90% of the ordinary voting shares of Grandchild Ltd.
The fair value of the net assets of Grandchild Ltd at the date of acquisition are represented by total shareholders’ equity as follows:
Share capital $ 200,000
Retained profits $ 100,000
Total shareholders' equity $ 300,000
The net profits of and dividends paid by Grandchild Ltd for the two years ending 30 June 2019 and 30 June 2020 are as follows:
The After Tax Profit for the year ended on 30 June 2019 $140,000
Dividends paid for the year ended on 30 June 2019 $(40,000)
The After Tax Profit for the year ended on 30 June 2020 $ 200,000
The following intra-group transaction had occurred since the acquisition the date:
- During the current period Child Ltd sold an inventory to Grandchild Ltd at a before tax profit of $10,000, all the inventory remains on hand of the Grandchild Ltd at 30 June 2020.
- On 1st July 2019 Parent Ltd sold a plant to Grandchild Ltd for $10,000, the original cost of this plant to the Parent Ltd was $10,000, with the accumulated depreciation of $2,000 on the date of the transfer.
There are no other changes in the equity for Grandchild Ltd.
REQUIRED:
- Prepare a table that shows the ownership interest percentages in the two subsidiaries distinguishing between direct and indirect interests.
- Based on the information provided, prepare the consolidation journal entries necessary to allocate the non-controlling interest in Grandchild Ltd as at 30 June 2020. (NOTE: only NCI entries are required in this questions)
Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett