On 1 July 20X6, Parent Ltd acquired 70 per cent of the share capital of Subsidiary Ltd
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Question:
On 1 July 20X6, Parent Ltd acquired 70 per cent of the share capital of Subsidiary Ltd for $400,000, which represented the fair value of the consideration paid, when the share capital and reserves of Subsidiary Ltd were:
Share capital $350,000
Revaluation surplus $100,000
Retained earnings $50,000
$500,000
All assets of Subsidiary Ltd were recorded at fair value at acquisition date.
Required:
- Prepare the consolidation elimination and adjustment entries to recognize the pre-acquisition capital and reserves of Subsidiary Ltd, assuming that the non-controlling interest was measured at the proportionate share of the acquirer's identifiable net assets (partial goodwill method).
- Where only a proportion of a subsidiary’s shares are owned by a parent entity, what proportion of the intragroup transactions between the parent entity and the subsidiary will need to be eliminated on consolidation?
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