On 1 July 2017, Linton Ltd acquired 80% of the share capital of Baker Ltd for $760,000. On that date, the shareholders’ equity of Baker Ltd consisted of share capital and retained earnings which were:

Share Capital (160,000 shares)        $640,000

Retained Earnings                             $200,000

At 1 July 2017, all the assets and liabilities of Baker Ltd were recorded at amounts equal to fair value except for land and plant. Land had a carrying amount of $500,000 and a fair value of $560,000. Plant had a fair value of $120,000 and a carrying amount of $90,000 (original cost $150,000). Land was sold on 31 December 2019. The remaining useful life of the plant at date of acquisition is 5 years.

During the financial year ended 30 June 2020, Baker Ltd sold to Linton Ltd goods which cost $40,000 for $80,000. At 30 June 2020, 40% of the goods had not been sold by Linton Ltd.

During the financial year ended 30 June 2020, Baker Ltd paid a dividend of 10¢ per share. No other dividends had been paid by Baker Ltd.

On 2 July 2017, Baker Ltd sold an item of inventory to Linton Ltd at a profit of $24,000 before tax. Linton Ltd records this asset as equipment and applies a 10% straight line depreciation method.

For the year ended 30 June 2020, the operating profit after tax of Baker Ltd was $120,000. At 30 June 2019, the balance in retained earnings of Baker Ltd was $576,000.

The tax rate is 30%.

Linton Ltd satisfied the requirements of AASB 10 regarding capacity to control Baker Ltd during the required period, and applies the partial goodwill method.

Required

Prepare consolidation adjustments, including any non-controlling interest, in consolidation journal form according to AASB 10 Consolidated Financial Statements as at 30 June 2020.

Answer rating: 100% (QA)

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