Prepare the Consolidation Worksheet Journal entries for the financial year

On 30 June 2016, P Ltd purchased 80% of the shares of S Ltd for $4,340,000 cash.

At the date of acquisition, S Ltd’s statement of financial position was as follows:

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Statement of Financial Position of S Ltd as at 30 June 2016

Assets                                                                                  Liabilities

Cash                                                           457,000            Accounts Payable                                       538,000

Accounts Receivable                                  721,000            Bank Loans                                             2,412,000

Inventory                                                    794,000            Deferred Tax Liabilities                             375,000

Land                                                        2,950,000

Buildings                                                    960,000            Equity

(Accumulated Depreciation)                   (256,000)            Share Capital                                           3,000,000

Plant & Equipment                                  2,780,000            Revaluation Surplus                                   875,000

(Accumulated Depreciation)                  (556,000)            Retained Profits 30/6/2016                        650,000

Total Assets                                             7,850,000            Total Equities                                          7,850,000

Additional Information

  1. a) On 30 June 2016, all the identifiable net assets of S Ltd were considered to be recorded at fair value in S Ltd’s statement of financial position, except land, which had a fair value of $3,450,000. The land has not been revalued in S Ltd’s accounts.
  2. b) P Ltd has a policy of valuing Non-Controlling Interest at Fair Value at acquisition date.
  3. c) On 30 June 2018, the recoverable amount of goodwill, relating to the purchase of S Ltd by P Ltd, was assessed to be $415,000. On 30 June 2020, the recoverable amount of goodwill, relating to the purchase of S Ltd by P Ltd, was assessed to be $335,000.
  4. d) On 1 November 2019 S Ltd lent $1,320,000 to P Ltd, at an annual rate of interest of 10%. Interest is payable half-yearly on 30 April, and 31 October each year.
  5. e) During the 2019-2020 financial year, S Ltd sold goods to P Ltd for $1,860,000. These goods had originally cost S Ltd $1,220,000.  On 30 June 2019, 25% of these goods remained in P Ltd’s closing inventory.
  6. f) On 30 June 2020, P Ltd still owed S Ltd $193,000 for inventory purchases.
  7. g) P Ltd’s opening inventory includes goods purchased from S Ltd for $547,000. These goods had originally cost S Ltd $367,000.
  8. h) On 1 July 2019, P Ltd sold a building to S Ltd for $1,150,000. P Ltd had originally purchased the building for $1,080,000, on 1 July 2014.  The original estimated useful life of the building was 30 years.
  9. i) The company income tax rate is 30%.

Statements of Profit or Loss of P Ltd and S Ltd for the year ended 30 June 2020

P Ltd                   S Ltd

Sales                                                                                                                      14,729,000             8,274,000

Cost of Goods Sold                                                                                              10,016,000             5,469,000

Gross Profit                                                                                                             4,713,000             2,805,000

Depreciation Expense                                                                                                535,000                356,000

Borrowing Costs Expense                                                                                         609,000                276,000

Administration Expenses                                                                                        2,475,000             1,431,000

Interest Revenue                                                                                                                    –                  88,000

Dividend Revenue                                                                                                     236,000                           –

Gain on Sale of Building                                                                                           250,000                           –

Profit before Income Tax Expense                                                                         1,580,000                830,000

Income Tax Expense                                                                                                  474,000                249,000

Profit after Income Tax Expense                                                                            1,106,000                581,000

Statements of Changes in Equity of P Ltd and S Ltd for the year ended 30 June 2020 [Extract]

P Ltd                   S Ltd

Retained Profits 1/7/19                                                                                           2,647,000             1,274,000

Profit after Income Tax Expense                                                                            1,106,000                581,000

Interim Dividend Paid                                                                                               264,000                140,000

Final Dividend Declared                                                                                           289,000                155,000

Retained Profits 30/6/20                                                                                         3,200,000             1,560,000

Statements of Financial Position of P Ltd and S Ltd as at 30 June 2020

P Ltd                   S Ltd

Assets

Cash                                                                                                                           589,000                398,000

Accounts Receivable                                                                                              1,504,000                841,000

Dividends Receivable                                                                                                124,000                           –

Interest Receivable                                                                                                                –                  22,000

Inventory                                                                                                                1,737,000                917,000

Land                                                                                                                        5,230,000             2,950,000

Buildings                                                                                                                 4,620,000             2,110,000

Accumulated Depreciation                                                                                   (1,848,000)             (430,000)

Plant and Equipment                                                                                              3,810,000             2,780,000

Accumulated Depreciation                                                                                   (2,286,000)          (1,668,000)

Loan to P Ltd                                                                                                                        –             1,320,000

Investment in S Ltd                                                                                                4,340,000                           –

Total Assets                                                                                                          17,820,000             9,240,000

Liabilities

Accounts Payable                                                                                                   1,138,000                588,000

Dividends Payable                                                                                                     289,000                155,000

Borrowing Costs Payable                                                                                          156,000                  73,000

Bank Loans                                                                                                             5,217,000             2,614,000

Loan from S Ltd                                                                                                     1,320,000                           –

Deferred Tax Liabilities                                                                                             495,000                375,000

Equity

Share Capital                                                                                                           4,850,000             3,000,000

Revaluation Surplus                                                                                                1,155,000                875,000

Retained Profits 30/6/20                                                                                         3,200,000             1,560,000

Total Equities                                                                                                        17,820,000             9,240,000

Required:

Prepare the Consolidation Worksheet Journal entries for the financial year ended 30 June 2020, including the consolidation journal entries recognising the non-controlling interest.  Show all workings necessary to derive your answer.

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