Pudding Ltd Acquired a 90 Per Cent Interest in Peaches

Multiple Choice

Pudding Ltd acquired a 90 per cent interest in Peaches Ltd on 1 July 2013 for a cash consideration of €2 300 000.On the same date,Peaches Ltd acquired a 70 per cent interest in Cream Ltd for a cash consideration of €1 100 000.The fair value of the net assets of each of the companies at acquisition is as follows: $\begin{array}{|l|r|r|}\hline & \text { Peaches Ltd } & \text { Cream Ltd } \\\hline \text { Share capital } & 1340000 & 100000 \\\hline \text { Retained earnings } & \underline{950000} & {500000} \\\hline & 2290000 & 1500000 \\\hline\end{array}$ Goodwill has been determined not to have been impaired.What would the analysis of direct and indirect interests in the subsidiaries and the elimination entries be for the consolidation for the period ended 30 June 2014?

A) $$\begin{array} { | l | r | r | } \hline \text { Analysis of equity interests: } & \begin{array} { r } \text { Peaches Ltd } \\\text { (\% interest) }\end{array} & \begin{array} { r } \text { Cream Ltd } \\\text { (\% interest) }\end{array} \\\hline \text { Pudding Ltd's interest: } & & \\\hline \text { Direct } & 90 & \\\hline \text { Indirect } & &63 \\\hline & & \\\hline \text { Outside equity interest: } & & \\\hline \text { Direct } & 10 & 27 \\\hline \text { Indirect } & & 10 \\\hline\end{array}$$ $$\begin{array} { | c | l | r | r | } \hline \text { Elimination entries: } & & \\\hline \text { Dr } & \text { Share capital } & 1206000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 855000 & \\\hline \text { Dr } & \text { Goodwill } & 239000 & \\\hline \mathrm { Cr } & \text { Investment in Peaches Ltd } & & 2300000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 630000 & \\\hline \text { Dr } & \text { Retained earnings } & 315000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 155000 & \\\hline \mathrm { Cr } & \text { lnvestment in Cream Ltd } & & 1100000 \\\hline\end{array}$$
B) $\begin{array}{|l|r|r|}\hline \text { Analysis of equity interests: } & \begin{array}{r}\text { Peaches Ltd } \\(\% \text { interest) }\end{array} & \begin{array}{r}\text { Cream Ltd } \\(\% \text { interest }) \end{array} \\\hline \text { Pudding Ltd's interest: } & \\\hline \text { Direct }&90 & 70 \\\hline \text { Indirect } & &7 \\\hline & & \\\hline \text { Outside equity interest: } & & \\\hline \text { Direct } &10 &21 \\\hline \text { Indirect } & &2 \\\hline\end{array}$ $$\begin{array} { | r | l | r | r | } \hline \text { Elimination entries: } & & \\\hline \text { Dr } & \text { Share capital } & 1206000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 855000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 239000 & \\\hline \mathrm { Cr } & \text { Investment in Peaches Ltd } & & 2300000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 770000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 385000 & \\\hline \mathrm { Cr } & \text { Outside equity interest } & & 55000 \\\hline \mathrm { Cr } & \text { lnvestment in Cream Ltd } & & 1100000 \\\hline\end{array}$$
C) $$\begin{array} { | l | r | r | } \hline \text { Analysis of equity interests: } & \begin{array} { r } \text { Peaches Ltd } \\\text { (\% interest) }\end{array} & \begin{array} { r } \text { Cream Ltd } \\\text { (\% interest) }\end{array} \\\hline \text { Pudding Ltd's interest: } & & \\\hline \text { Direct } & 90 & \\\hline \text { Indirect } & & 70\\\hline & & \\\hline \text { Outside equity interest: } & & \\\hline \text { Direct } & 10 & 23 \\\hline \text { Indirect } & & 70 \\\hline\end{array}$$ $$\begin{array} { | r | l | r | r | } \hline \text { Elimination entries: } & & \\\hline \text { Dr } & \text { Share capital } & 1340000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 950000 & \\\hline \text { Dr } & \text { Goodwill } & 100000 & \\\hline \mathrm { Cr } & \text { Investment in Peaches Ltd } & & 2300000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 1000000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 500000 & \\\hline \mathrm { Dr } & \text { Outside equity interests } & & 400000 \\\hline \mathrm { Cr } & \text { lnvestment in Cream Ltd } & & 1100000 \\\hline\end{array}$$
D) $\begin{array}{|l|r|r|}\hline \text { Analysis of equity interests: } & \begin{array}{r}\text { Peaches Ltd } \\(\% \text { interest) }\end{array} & \begin{array}{r}\text { Cream Ltd } \\(\% \text { interest }) \end{array} \\\hline \text { Pudding Ltd's interest: } & & \\\hline \text { Direct } &90 & \\\hline \text { Indirect } & &63 \\\hline \text { Outside equity interest: } & \\\hline \text { Direct } & 10 & 30 \\\hline \text { Indirect } & &7 \\\hline\end{array}$ $$\begin{array} { | c | l | r | r | } \hline \text { Elimination entries: } & & \\\hline \text { Dr } & \text { Share capital } & 1206000 & \\\hline \text { Dr } & \text { Retained earnings } & 855000 & \\\hline \text { Dr } & \text { Goodwill } & 239000 & \\\hline \mathrm { Cr } & \text { Investment in Peaches Ltd } & & 2300000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 700000 & \\\hline \text { Dr } & \text { Retained earnings } & 350000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 50000 & \\\hline \mathrm { Cr } & \text { lnvestment in Cream Ltd } & & 1100000 \\\hline\end{array}$$