On 1 July 2019, ABC Ltd purchased 90% of the shares in LLP Ltd for $892,000. On

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Question:

On 1 July 2019, ABC Ltd purchased 90% of the shares in LLP Ltd for $892,000. On this date, the equity of LLP Ltd consisted of:

Share capital 600,000

Retained earnings 160,000

General reserve 60,000

All of the identifiable net assets of LLP Ltd were equal to their fair value except for the following assets:

Inventory: 130,000(Carrying) 150,000 (FV)

Plant (cost $720,000): 480,000(Carrying) 560,000 (FV)

The inventory was all sold to external parties by 30 June 2020. The plant had a remaining useful life of 5 years from 1 July 2019, an estimated residual value of nil, and is depreciated on a straight-line basis. ABC Ltd uses the full goodwill method. At acquisition date, the NCI has a fair value of 96,000. Assume a tax rate of 30%. Additional Information:

· LLP Ltd made a profit after tax of $242,000 for the year ended 30 June 2020.

· LLP Ltd sold $72,000 in inventory to ABC Ltd during the year ended 30 June 2020. LLP Ltd had recorded a profit of $24,000 before tax on these transactions. At 30 June 2020, half of this inventory had been sold to external parties, and the other half is still on hand with LLP Ltd.

· On 1 January 2020, ABC Ltd loaned $60,000 to LLP Ltd. Interest on the loan is 12% per annum, and an instalment of interest was paid by LLP Ltd on 30 June 2020.

Required:

1. Prepare an acquisition analysis in relation to the acquisition made by ABC Ltd.

2. Prepare the consolidation journal entries, including NCI entries, necessary to prepare the consolidated financial statements for the year ended 30 June 2020