Question

onsider the following:

On 1st July 20X6 P Ltd acquired all the share capital of S Ltd

At that date the equity of S Ltd was:

Share Capital ????$150,000

Retained earnings ???$12,000

Additional information:

During the current year P Ltd received a dividend of $15,000 declared by S Ltd at 30 June 20X7.

Consolidation worksheet 30 June 20X8	P Ltd	S Ltd	Elimination		Consolidated Statement
			Dr	Cr
Gross profit	300,000	150,000
Dividend received from S Ltd	22,000
	322,000	150,000
Expenses	102,000	50,000
Profit before tax	220,000	100,000
Less: Income tax expenses	60,000	30,000
Profit	160,000	70,000
Retained earnings 01-07-20X7	25,000	20,000
Available for appropriation	185,000	90,000
Appropriation
Interim dividend paid	20,000	7,000
Declared dividend	20,000	13,000
Total appropriation	40,000	20,000
Retained earnings 30-06-20X8	145,000	70,000
Share capital	300,000	150,000
Dividend payable	20,000	13,000
Other liabilities	140,000	67,000
	605,000	300,000
Share in S Ltd	170,000	-
Other assets	435,000	300,000
Goodwill in acquisition	-	-
	605,000	605,000

Requirement:

Complete the worksheet.

Answer 1

Consolidation worksheet 30 June 20X8	P Ltd	S Ltd	Elimination		Consolidated Statement
			Dr	Cr
Gross profit	300,000	150,000			450,000
Dividend received from S Ltd	22,000		22,000		-
	322,000	150,000	22,000	-	450,000
Expenses	102,000	50,000			152,000
Profit before tax	220,000	100,000			298,000
Less: Income tax expenses	60,000	30,000			90,000
Profit	160,000	70,000			208,000
Retained earnings 01-07-20X7	25,000	20,000	12,000	15,000	48,000
Available for appropriation	185,000	90,000			256,000
Appropriation
Interim dividend paid	20,000	7,000		7,000	20,000
Declared dividend	20,000	13,000		13,000	20,000
Total appropriation	40,000	20,000			40,000
Retained earnings 30-06-20X8	145,000	70,000			216,000
Share capital	300,000	150,000	150,000		300,000
Dividend payable	20,000	13,000	13,000		20,000
Other liabilities	140,000	67,000			207,000
	605,000	300,000			743,000
Share in S Ltd	170,000	-		170,000	-
Other assets	435,000	300,000			735,000
Goodwill in acquisition	-	-	8,000		8,000
	605,000	300,000			743,000

Notes:

1. Dividends paid or payable by the subsidiary are all elimiated

a. Dividends received by P Ltd is reduced from its Net income or profit

b. Dividends paid by S ltd which pertain to previous year $15,000 is added back to the retained earnings and so is the interim dividends paid $7,000

c. Dividends declared and dividend payable $13,000 each are eliminated

2. Investment in Subsidiary ($170,000) is elimiated and so is the Equity ($150,000) and RE ($12,000) on the date of acquistion

3. Goodwill is added:

Amount Paid	170,000
Equity	150,000
RE	12,000
Goodwill	8,000