On 1 July 2015 Harry Ltd purchased 80 per cent of the issued share capital of Wills Ltd and has control of Wills.The fair value of the net assets of Wills Ltd on that date was represented as follows:

\begin{array} { | l | r | } \hline \text { Share capital } & \$ 2000000 \\\hline \text { Retained earnings } & 500000 \\\hline & \$ 2500000 \\\hline\end{array}

Harry Ltd paid cash consideration of $2 500 000 for Wills.Wills Ltd made an operating profit of $350 000,there were no intragroup transactions during the period ended 30 June 2016.Goodwill had been determined to have been impaired during the year by $25 000.What consolidation journal entries are required for the period and what is the non-controlling interest in equity as at 30 June 2016?
A)

\begin{array}{l}{ \text { Consolidation journal entries: } }\\\begin{array} { | c | l | r | r |} \hline \mathrm { Dr } & \text { Share capital } & 1600000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \\\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \\\hline & & & \\\hline\end{array}\\\text { Non-controlling interest: }\\\begin{array} { | l | r | r | } \hline \text { Operating profit } & 70000 & \\\hline \text { Opening retained earnings } & 100000 & \\\hline \text { Share capital } & \underline{400000} & \\\hline \text { Total } & \underline{570000} & \\\hline\end{array}\end{array}

\text { Consolidation journal entries: } \\\begin{array}{|c|l|r|r|}\hline \mathrm{Dr} & \text { Share capital } & 2000000 & \\\hline \mathrm{Dr} & \text { Retained earnings } & 500000 & \\\hline \mathrm{Cr} & \text { Investment in Wills Ltd } & & 2500000 \\\hline & & & \\\hline\end{array}

\begin{array}{l}\text { Non-controlling interest: }\\\begin{array}{|l|r|r|}\hline \text { Retained earnings } & 100000 & \\\hline \text { Share capital } & \underline{400000} & \\\hline \text { Total } & \underline{500000} & \\\hline\end{array}\end{array}

\begin{array}{l}{ \text { Consolidation journal entries: } }\\\begin{array} { | c | l | r | r |} \hline \mathrm { Dr } & \text { Share capital } & 1600000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \\\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \\\hline & & & \\\hline\end{array}\\\text { Non-controlling interest: }\\\begin{array} { | l | r | r | } \hline \text { Operating profit } & 65000 & \\\hline \text { Opening retained earnings } & 100000 & \\\hline \text { Share capital } & \underline { 400000 } & \\\hline \text { Total } & \underline { 565000 } & \\\hline\end{array}\end{array}

\begin{array}{l}{ \text { Consolidation journal entries: } } \\\begin{array} { | c | l | r | r |} \hline \mathrm { Dr } & \text { Share capital } & 1600000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 400000 & \\\hline \mathrm { Dr } & \text { Goodwill } & 500000 & \\\hline \mathrm { Cr } & \text { Investment in Wills Ltd } & & 2500000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Impairment loss } & 25000 & \\\hline \mathrm { Cr } & \text { Accumulated impairment loss } & & 25000 \\\hline & & & \\\hline\end{array}\\\text { Non-controlling interest: }\\\begin{array} { | l | r | r | } \hline \text { Operating profit } & 68750 & \\\hline \text { Opening retained earnings } & 100000 & \\\hline \text { Goodwill } & 125000 & \\\hline \text { Share capital } & \underline { 400000 } & \\\hline \text { Total } & \underline { 693750} & \\\hline\end{array}\end{array}

Where the Parent Entity Holds Less Than 100 Per Cent

Multiple Choice

Correct Answer:VerifiedUnlock this answer nowGet Access to more Verified Answers free of chargeAccess For Free

Correct Answer:
Verified
Unlock this answer now
Get Access to more Verified Answers free of charge