Window Ltd acquired a 70 per cent interest in Door Ltd on 1 July 2013 for a cash consideration of $1 399 000.At that date fair value of the net assets of Door Ltd were represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 980000 \\ \hline \text { Asset revaluation reserve } & 250000 \\ \hline \text { Retained earnings } & \underline{740000} \\ \hline & \underline{1970000} \\ \hline \end{array}\] On 1 July 2014 Window Ltd purchased a further 30 per cent of the issued capital of Door Ltd for cash consideration of $665 000.At this date the fair value of the net assets of Door Ltd were represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 980000 \\ \hline \text { Asset revaluation reserve } & 400000 \\ \hline \text { Retained earnings } & \underline { 820000 } \\ \hline & \underline { 2200000 } \\ \hline \end{array}\] Impairment of goodwill was assessed at $4000,relating evenly across each of the last two years.During the period ended 30 June 2015,Door Ltd proposed a dividend of $120 000.The dividend has not been paid at the end of the period,but Window Ltd has a policy of accruing the dividends of subsidiaries when they are proposed.There were no other intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary,account for goodwill and eliminate the dividends for the period ended 30 June 2015?

A) $\text { Elimination and impairment entries: }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 980000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 295000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 764000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 15000 & \\ \hline \mathrm { Cr } & \text { Investment in Door Ltd } & & 2054000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 4000 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 4000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend payable } & 120000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & & 120000 \\ \hline \end{array}$ B) \(\text { Elimination and impairment entries: } \\ \begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 686000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 175000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 518000 & \\ \hline \mathrm{Dr} & \text { Goodwill } & 20000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 1399000 \\ \hline\\ \hline \mathrm{Dr} & \text { Share capital } & 294000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 246000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 660000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Non-monetary assets } & 5000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & &5000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Retained earnings beginning } & 2000& \\ \hline \mathrm{Dr} & \text { Goodwill impairment expense } & 2000& \\ \hline \mathrm{Cr} & \text { Accumulated impairment losses-goodwill } & &4000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend proposed } & 120000& \\ \hline \mathrm{Cr} & \text { Dividend payable } & &120000\\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend income } & 120000& \\ \hline \mathrm{Cr} & \text { Dividend receivable } & & 120000\\ \hline \end{array}\) C) \(\text { Elimination and impairment entries: }\\ \begin{array}{|r|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 686000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 175000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 518000 & \\ \hline \mathrm{Dr} & \text { Goodwill } & 20000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 1399000 \\ \hline\\ \hline \mathrm{Dr} & \text { Share capital } & 294000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } &120000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 246000 & \\ \hline \mathrm{Dr} & \text { Accumulated impairment losses-goodwill } &5000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 665000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Retained earnings beginning } & 2000 & \\ \hline \mathrm{Dr} & \text { Goodwill impairment expense } & 2000 & \\ \hline \mathrm{Cr} & \text { Accumulated impairment losses-goodwill } & &4000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend payable } & 12000 0& \\ \hline \mathrm{Cr} & \text { Dividend proposed } & &120000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend income } & 120000 & \\ \hline \mathrm{Cr} & \text { Dividend receivable } & &120000 \\ \hline \end{array}\) D) $\text { Elimination and impairment entries: }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 294000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 246000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 5000 & \\ \hline \mathrm { Cr } & \text { Investment in Door Ltd } & & 665000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 4000 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 4000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend income } & 84000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & & 84000 \\ \hline \end{array}$ A) $\text { Elimination and impairment entries: }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 980000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 295000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 764000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 15000 & \\ \hline \mathrm { Cr } & \text { Investment in Door Ltd } & & 2054000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 4000 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 4000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend payable } & 120000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & & 120000 \\ \hline \end{array}$ B) \(\text { Elimination and impairment entries: } \\ \begin{array}{|l|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 686000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 175000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 518000 & \\ \hline \mathrm{Dr} & \text { Goodwill } & 20000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 1399000 \\ \hline\\ \hline \mathrm{Dr} & \text { Share capital } & 294000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 246000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 660000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Non-monetary assets } & 5000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & &5000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Retained earnings beginning } & 2000& \\ \hline \mathrm{Dr} & \text { Goodwill impairment expense } & 2000& \\ \hline \mathrm{Cr} & \text { Accumulated impairment losses-goodwill } & &4000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend proposed } & 120000& \\ \hline \mathrm{Cr} & \text { Dividend payable } & &120000\\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend income } & 120000& \\ \hline \mathrm{Cr} & \text { Dividend receivable } & & 120000\\ \hline \end{array}\) C) \(\text { Elimination and impairment entries: }\\ \begin{array}{|r|l|r|r|} \hline \mathrm{Dr} & \text { Share capital } & 686000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } & 175000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 518000 & \\ \hline \mathrm{Dr} & \text { Goodwill } & 20000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 1399000 \\ \hline\\ \hline \mathrm{Dr} & \text { Share capital } & 294000 & \\ \hline \mathrm{Dr} & \text { Asset revaluation reserve } &120000 & \\ \hline \mathrm{Dr} & \text { Retained earnings } & 246000 & \\ \hline \mathrm{Dr} & \text { Accumulated impairment losses-goodwill } &5000 & \\ \hline \mathrm{Cr} & \text { Investment in Door Ltd } & & 665000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Retained earnings beginning } & 2000 & \\ \hline \mathrm{Dr} & \text { Goodwill impairment expense } & 2000 & \\ \hline \mathrm{Cr} & \text { Accumulated impairment losses-goodwill } & &4000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend payable } & 12000 0& \\ \hline \mathrm{Cr} & \text { Dividend proposed } & &120000 \\ \hline & & & \\ \hline \mathrm{Dr} & \text { Dividend income } & 120000 & \\ \hline \mathrm{Cr} & \text { Dividend receivable } & &120000 \\ \hline \end{array}\) D) $\text { Elimination and impairment entries: }\\ \begin{array} { | c | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 294000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 246000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 5000 & \\ \hline \mathrm { Cr } & \text { Investment in Door Ltd } & & 665000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 4000 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 4000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Dividend income } & 84000 & \\ \hline \mathrm { Cr } & \text { Dividend receivable } & & 84000 \\ \hline \end{array}$ C

Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2013 for a cash consideration of $838 000.At that date the fair value of the net assets of Chips Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 560000 \\ \hline \text { Asset revaluation reserve } & 90000 \\ \hline \text { Retained earnings } & \underline{360000} \\ \hline & \underline{1010000} \\ \hline \end{array}\] On 30 June 2015 Fish Ltd sold all its shares in Chips Ltd for $950 000.At this date the fair value of the net assets of Chips Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 560000 \\ \hline \text { Asset revaluation reserve } & 120000 \\ \hline \text { Retained earnings } & \underline { 490000 } \\ \hline & \underline { 1170000 } \\ \hline \end{array}\] The retained earnings of $490 000 includes operating profit after tax of $90 000 from the current period.Impairment of goodwill was assessed at $6000.The investment has not been marked to market during the period that the shares were held.What is the amount of profit or loss on the sale of the shares recognised in the books of Fish Ltd during the period ended 30 June 2015?

A) $14 000 B) $112 000 C) $20 000 D) $118 000 A) $14 000 B) $112 000 C) $20 000 D) $118 000 B

Fan Ltd acquired a 60 per cent interest in Dance Ltd on 1 July 2012 for a cash consideration of $780 000.At that date the fair value of the net assets of Dance Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 860000 \\ \hline \text { Asset revaluation reserve } & 120000 \\ \hline \text { Retained earnings } & \underline { 290000 } \\ \hline & \underline { 1270000 } \\ \hline \end{array}\] On 30 June 2015 Fan Ltd sold all its shares in Dance Ltd for $880 000.At this date the fair value of the net assets of Dance Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 860000 \\ \hline \text { Asset revaluation reserve } & 240000 \\ \hline \text { Retained earnings } & \underline{350000 }\\ \hline & \underline{1450000} \\ \hline \end{array}\] The retained earnings of $350 000 include operating profit after tax of $20 000 from the current period.Impairment of goodwill was assessed at $5400,the impairment having been incurred evenly across the last three years.The investment has not been marked to market during the period that the shares were held.What is the elimination entry required for the consolidated accounts?

A) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 10200 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 20400 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 72000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 100000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 2600 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 118000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 62000 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 20000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 40000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 120000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 100000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 2600 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 10200 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 20400 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 72000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 20000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 40000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 62000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 118000 \\ \hline \end{array}\] A) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 10200 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 20400 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 72000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 100000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 2600 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 118000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 62000 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 20000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 40000 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 120000 \\ \hline \end{array}\] C) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 100000 & \\ \hline \mathrm { Dr } & \text { Loss on sale of subsidiary } & 2600 & \\ \hline \mathrm { Cr } & \text { Operating profit after tax } & & 10200 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 20400 \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 72000 \\ \hline \end{array}\] D) \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Operating profit after tax } & 20000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 40000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 120000 & \\ \hline \mathrm { Cr } & \text { Profit on sale of investment } & & 62000 \\ \hline \mathrm { Cr } & \text { Profit on sale of subsidiary } & & 118000 \\ \hline \end{array}\]

On 1 July 2012,City Ltd acquired 65 per cent of the issued capital of Town Ltd for $850 000 when the fair value of the net assets of Town Ltd was $1.2 million (share capital $1 million and retained earnings $0.2 million).On 30 June 2015 City Ltd purchased a further 25 per cent of Town's issued capital for $300 000.The net assets of Town Ltd were not stated at fair value in the accounts,which are summarised as follows: \[\begin{array} { | l | r | } \hline \text { Assets } & \\ \hline \text { Cash } & 100000 \\ \hline \text { Debtors } & 350000 \\ \hline \text { Inventory } & 970000 \\ \hline \text { Plant and equipment (net) } & 1020000 \\ \hline \text { Liabilities } & \\ \hline \text { Creditors } & 280000 \\ \hline \text { Loans } & 850000 \\ \hline \text { Shareholders' funds } & \\ \hline \text { Share capital } & 1000000 \\ \hline \text { Retained earnings } & 310000 \\ \hline \end{array}\] The fair value of the plant and equipment is $1 090 000 at year end.Goodwill has been deemed not to have been impaired.There were no inter-company transactions during the period. What are the consolidation journal entries required for the period ended 30 June 2015? (Ignore the tax effect of the revaluation.)

A) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 27500 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 27500 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 17500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 45000 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] D) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 900000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 17500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 207500 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 25000 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 1150000 \\ \hline \end{array}\] A) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 27500 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 27500 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 650000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 130000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 850000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 250000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 17500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 77500 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 45000 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 300000 \\ \hline \end{array}\] D) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Plant and equipment } & 70000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 70000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 900000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 17500 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 207500 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 25000 \\ \hline \mathrm { Cr } & \text { Investment in Town Ltd } & & 1150000 \\ \hline \end{array}\]

The following consolidation adjusting journal entries appeared at the end of a period in which the parent sold all of its shareholding in a subsidiary.It received $1 200 000 for the shares. \[\begin{array} { | l | l | r | r | } \hline \mathrm { Dr } & \text { Profit on sale of investment } & 500000 & \\ \hline \mathrm { Dr } & \text { Loss on sales of subsidiary } & 250000 & \\ \hline \mathrm { Cr } & \text { Profit after tax } & & 179000 \\ \hline \mathrm { Cr } & \text { Retained earnings } & & 271000 \\ \hline \mathrm { Cr } & \text { Revaluation reserve } & & 300000 \\ \hline \end{array}\] The 'Cr-Profit after tax' entry above represents:

A) the profit made by the parent on the sale of the shares. B) the profit made by the economic entity on the sale of the shares. C) the amount accruing to the minority interest of the subsidiary. D) the share of profits derived by the subsidiary in the current period, up to the time of divestment. A) the profit made by the parent on the sale of the shares. B) the profit made by the economic entity on the sale of the shares. C) the amount accruing to the minority interest of the subsidiary. D) the share of profits derived by the subsidiary in the current period, up to the time of divestment.

On 1 July 2014,Horse Ltd acquired 80 per cent of the issued capital of Wagon Ltd for $785 000 when the fair value of the net assets of Wagon Ltd was $950 000 (share capital $800 000 and retained earnings $150 000).On 30 June 2017 Horse Ltd purchased the final 20 per cent of Wagon's issued capital for $380 000.The net assets of Wagon Ltd were not stated at fair value in the accounts,which are summarised as follows: \[\begin{array} { | l | r | } \hline \text { Assets } & \\ \hline \text { Cash } & 50500 \\ \hline \text { Debtors } & 130000 \\ \hline \text { Inventory } & 250000 \\ \hline \text { Plant and equipment (net) } & 1200000 \\ \hline \text { Land } & 769500 \\ \hline \text { Liabilities } & \\ \hline \text { Creditors } & 100000 \\ \hline \text { Loans } & 500000 \\ \hline \text { Shareholders' funds } & \\ \hline \text { Share capital } & 800000 \\ \hline \text { Retained earnings } & 1000000 \\ \hline \end{array}\] The fair value of the plant and equipment is $1 250 000 and the land was valued at $970 000 at year end.Impairment of goodwill was assessed at $7500,the impairment having been incurred evenly across the last three years.There were no intragroup transactions during the period. What are the consolidation journal entries required for the period ended 30 June 2017? (Ignore the tax effect of the revaluation.)

A) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Dr } & \text { Land } & 200500 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 250500 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 800000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 50100 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 320000 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 5100 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 1165000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 7500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 50000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 10000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Dr } & \text { Reserve in additional equity } & 10000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 20000 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] D) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Dr } & \text { Land } & 200500 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 250500 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 50100 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 30100 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] A) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Dr } & \text { Land } & 200500 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 250500 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 800000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 50100 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 320000 & \\ \hline \mathrm { Cr } & \text { Goodwill } & & 5100 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 1165000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 7500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] B) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 50000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 10000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Dr } & \text { Reserve in additional equity } & 10000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] C) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 20000 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\] D) \[\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 640000 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 120000 & \\ \hline \mathrm { Dr } & \text { Goodwill } & 25000 & \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 785000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Plant and equipment } & 50000 & \\ \hline \mathrm { Dr } & \text { Land } & 200500 & \\ \hline \mathrm { Cr } & \text { Asset revaluation reserve } & & 250500 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Share capital } & 160000 & \\ \hline \mathrm { Dr } & \text { Asset revaluation reserve } & 50100 & \\ \hline \mathrm { Dr } & \text { Retained earnings } & 200000 & \\ \hline \mathrm { Cr } & \text { Reserve in additional equity } & & 30100 \\ \hline \mathrm { Cr } & \text { Investment in Wagon Ltd } & & 380000 \\ \hline & & & \\ \hline \mathrm { Dr } & \text { Retained earnings beginning } & 5000 & \\ \hline \mathrm { Dr } & \text { Goodwill impairment expense } & 2500 & \\ \hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 7500 \\ \hline \end{array}\]

Black Ltd acquired an 80 per cent interest in White Ltd on 1 July 2013 for a cash consideration of $419 000.At that date the fair value of the net assets of White Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 280000 \\ \hline \text { Asset revaluation reserve } & 45000 \\ \hline \text { Retained earnings } & 180000 \\ \hline & 505000 \\ \hline \end{array}\] On 30 June 2015 Black Ltd sold all its shares in White Ltd for $475 000.At this date the fair value of the net assets of White Ltd was represented by: \[\begin{array} { | l | r | } \hline \text { Share capital } & 280000 \\ \hline \text { Asset revaluation reserve } & 60000 \\ \hline \text { Retained earnings } & 245000 \\ \hline & 585000 \\ \hline \end{array}\] The retained earnings of $445 000 includes operating profit after tax of $45 000 from the current period.Impairment of goodwill was assessed at $3000.The investment has not been marked to market during the period that the shares were held.What is the amount of profit or loss on the sale of the shares recognised in the books of Black Ltd during the period ended 30 June 2015?

A) $59 000 B) $10 000 C) $56 000 D) $7000 A) $59 000 B) $10 000 C) $56 000 D) $7000

Exam 30: Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Window Ltd acquired a 70 per cent interest in Door Ltd on 1 July 2013 for a cash consideration of $1 399 000.At that date fair value of the net assets of Door Ltd were represented by: Share capital 980000 Asset revaluation reserve 250000 Retained earnings On 1 July 2014 Window Ltd purchased a further 30 per cent of the issued capital of Door Ltd for cash consideration of $665 000.At this date the fair value of the net assets of Door Ltd were represented by: Share capital 980000 Asset revaluation reserve 400000 Retained earnings Impairment of goodwill was assessed at $4000,relating evenly across each of the last two years.During the period ended 30 June 2015,Door Ltd proposed a dividend of $120 000.The dividend has not been paid at the end of the period,but Window Ltd has a policy of accruing the dividends of subsidiaries when they are proposed.There were no other intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary,account for goodwill and eliminate the dividends for the period ended 30 June 2015?

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Fish Ltd acquired an 80 per cent interest in Chips Ltd on 1 July 2013 for a cash consideration of $838 000.At that date the fair value of the net assets of Chips Ltd was represented by: Share capital 560000 Asset revaluation reserve 90000 Retained earnings On 30 June 2015 Fish Ltd sold all its shares in Chips Ltd for $950 000.At this date the fair value of the net assets of Chips Ltd was represented by: Share capital 560000 Asset revaluation reserve 120000 Retained earnings The retained earnings of $490 000 includes operating profit after tax of $90 000 from the current period.Impairment of goodwill was assessed at $6000.The investment has not been marked to market during the period that the shares were held.What is the amount of profit or loss on the sale of the shares recognised in the books of Fish Ltd during the period ended 30 June 2015?

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Additional purchases of shares in a subsidiary should be accounted for by the combined tranche method,according to AASB 3.

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Showing 1 - 20 of 49

Exam 30: Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Additional purchases of shares in a subsidiary should be accounted for by the combined tranche method,according to AASB 3.

Which of the following is not a reason for a parent to lose control of a subsidiary?

Explain how the gain or loss is calculated for: (a)the parent's investment; (b)the economic entity; when the parent sells some of its shares in a subsidiary.

The profit or loss on the sale of shares in a subsidiary will be reported in both the books of the parent legal entity and the consolidated accounts.The method of calculating the profit or loss in the parent's individual legal entity books is to:

Briefly outline the general requirements of the single-date method of accounting for the acquisition of additional shares in a subsidiary.

The profit or loss on the sale of shares in a controlled entity will be the same in the parent entity's legal books as it is in the consolidated accounts.

Two common approaches to accounting for acquisition of additional shares in a subsidiary include:

The required method (according to AASB 10)of accounting for the acquisition of additional shares in a subsidiary is the single-date method.

Explain how goodwill is determined in the case of a parent entity obtaining control over successive acquisitions of another entity using the single-date method.

Which of the following statements is in accordance with AASB 10 Consolidated Financial Statements with respect to multiple acquisitions?

AASB 3 specifies that using the single-date method where a parent entity purchases additional shares in a subsidiary over time:

In calculating the profit or loss on the sale of shares in a controlled entity that is to be included in the group accounts,consideration should be given to the share of post-acquisition profits and movements in reserves that have been recognised.

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Related Party Disclosures

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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