Question

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).

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