Topic 5 Non-controlling interests (40 marks)

On 1 July 2017, Kirby Ltd acquired 75% of the issued shares (ex div.) of Albie Ltd for $135 000. At this date the equity of Albie Ltd consisted of:

	$
Share capital	60,000
General reserve	6,000
Retained earnings	30,000

At the date of the business combination, all the identifiable assets and liabilities of Albie Ltd had carrying amounts equal to their fair values except for the following.

	Carrying Amount $	Fair Value $
Plant cost ($130,000)	90,000	120,000
Inventories	50,000	62,000
Accounts Receivable	66,000	60,000

The following information relates to the net assets on the date of acquisition.

1. Kirby Ltd uses the partial goodwill method.
2. The tax rate is 30%.
3. By 30 June 2018, all the inventories were sold to entities outside the group.
4. Also, by 30 June 2018, receivables of $66,000 had been collected.
5. The plant had a further useful life of 5 years. It was sold by Albie Ltd to external entities on 1 April 2022 for $6,000.

Additional information

• At 30 June 2021, inventories of Kirby Ltd included assets sold to it by Albie Ltd for a before-tax profit of $600. These items were sold to external entities during the year ended 30 June 2022.
• On 1 January 2022, Albie Ltd sold plant to Kirby Ltd for a before-tax profit of $2,400. This plant was carried at $6,000 (original cost $40,000) in the records of Albie Ltd at time of sale. Depreciation on this type of plant is calculated using a 20% p.a. straight-line method.
• Financial information provided by Albie Ltd concerning events affecting it during the year ended 30 June 2022 was as follows.

	$
Profit for the year	46,800
Retained earnings at 1 July 2021	60,000
	106,800
Dividend paid	(28,000)
Dividend declared	(8,000)
Transfer to general reserve	(3,000)
	(39,000)
Retained earnings at 30 June 2022	67,800

Albie Ltd also reported a comprehensive income for the year ended 30 June 2022 of $41,500, being an increase in the value of land. The asset revaluation surplus increased from $46,000 to $87,500.

The transfer to general reserve is from post-acquisition retained earnings.

Required:

1. Prepare the acquisition analysis in relation to the acquisition to determine the gain on bargain purchase or goodwill. (5 marks)
2. Prepare business combination valuation reserve (BCVR) journal entries. (3 marks)
3. Prepare the pre-acquisition entries. (3 marks)
4. Calculate and prepare the NCI share of equity. (9 marks)
5. Calculate and journalise the intra-group transactions in the records of Kirby Ltd., as at 30 June 2022. (10 marks)

Use of excel, use of data input table, formulae used, professional appearance etc