Question

On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326...

On 1 July 2019 Prometheus Ltd acquired 90% of the shares of Unbound Ltd for $326 430. At this date the equity of Unbound Ltd consisted of share capital of $225 000 and retained earnings of $90 000. All the identifiable asset and liabilities of Unbound Ltd were recorded at amounts equal to fair value except for:

Carrying amount

Fair                                                                                                                                                    value

Land

$  60 000

$  67 500

Plant (cost $285 000)

225 000

247 500

Inventory

    11 250

13 500

The plant was considered to have a further 10-year life. All the inventory was sold by 30 June 2020. The tax rate is 30%. Prometheus Ltd uses the partial goodwill method.

During the 2019–20 period Unbound Ltd recorded a profit of $22 500.

Required

Prepare the consolidation worksheet journal entries for the preparation of the consolidated financial statements of Prometheus Ltd at 30 June 2020. (round to the nearest dollar, worksheets are not required).

Homework Answers

Answer #1

Answer :

Workings:

Purchase consideration 3,26,430
Less:
Share capital (2,02,500)
Retained earnings (81,000)
Less: fair value in consolidation
Land (6,750)
Plant (20,250)
Inventory (2,025)
Goodwill 13,905

Journal entries for preparation of consolidated financial statements :

Date Account title Debit Credit
June 30, 2020 Land 7,500
Plant 22,500
Inventory 2,250
Goodwill 13,905
Share capital in unbound 2,25,000
Retained earnings in unbound 90,000
Investment 3,26,430
NCI 34,725
June 30 , 2020 cost of goods sold 2,250
Inventory 2,250
June 30, 2020 NCI 225
Profit or loss 225
June 30, 2020 Depreciation 2,250
Plant 2,250
June 30,2020 NCI 225
Profit or loss 225
June 30, 2020 profit or loss 2,250
NCI 2,250
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