Mickey Ltd Acquired a 70 Per Cent Interest in Mouse

Multiple Choice

Mickey Ltd acquired a 70 per cent interest in Mouse Ltd on 1 July 2013 for a cash consideration of $1 700 000.At that date the shareholders' funds of Mouse Ltd were: $$\begin{array} { | l | r | } \hline \text { Share capital } & 1600000 \\\hline \text { Retained earnings } & \underline { 800000 } \\\hline & \underline { 2400000 } \\\hline\end{array}$$ The assets of Mouse Ltd were recorded at fair value at the time of the purchase.
On 1 July 2015 Mickey Ltd purchased a further 20 per cent of the issued capital of Mouse Ltd for a cash consideration of $530 000.At this date the fair value of the net assets of Mouse Ltd were represented by:
$$\begin{array} { | l | r | } \hline \text { Share capital } & 1600000 \\\hline \text { Retained earnings } & \underline { 900000 } \\\hline & \underline { 2500000 } \\\hline\end{array}$$ Impairment of goodwill was assessed at $9000,of which $5000 relates to the current period.There were no intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary and account for goodwill for the period ended 30 June 2016?

A)
$\text { Elimination and impairment entries: }\\\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 1120000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 560000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 20000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 1700000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 480000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 340000 & \\\hline \mathrm { Dr } & \text { Minority interest } & & 290000 \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 530000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Retained earnings beginning } & 4000 & \\\hline \mathrm { Dr } & \text { Goodwill impairment expense } & 5000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 9000 \\\hline\end{array}$
B)
${ \text { Elimination and impairment entries: } }\\\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 1440000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 740000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 70000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 2250000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Goodwill impairment expense } & 9000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 9000 \\\hline\end{array}$
C)
$\text { Elimination and impairment entries: } \\\begin{array} { | r | l | r | r | } \hline \mathrm { Dr } & \text { Share capital } & 1120000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 560000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 20000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 1700000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 320000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 180000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 500000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Non-monetary items } & 30000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 30000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Retained earnings beginning } & 4000 & \\\hline \mathrm { Dr } & \text { Goodwill impairment expense } & 5000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 9000 \\\hline\end{array}$
D)
$\text { Elimination and impairment entries: } \\\begin{array} { | r | l | r | r | }\hline \mathrm { Dr } & \text { Share capital } & 1120000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 560000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 20000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 1700000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Share capital } & 320000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 180000 & \\\hline \mathrm { Dr } & \text { Reserve in additional equity } & 30000 & \\\hline \mathrm { Cr } & \text { Investment in Mouse Ltd } & & 530000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Retained earnings beginning } & 4000 & \\\hline \mathrm { Dr } & \text { Goodwill impairment expense } & 5000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment losses-goodwill } & & 9000 \\\hline\end{array}$