question archive The following three entities make up an economic group as follows: Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000
The following three entities make up an economic group as follows: Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000
Subject:AccountingPrice: Bought3
The following three entities make up an economic group as follows:
Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000. Both investments were acquired on 1 July 2018. On this date, shareholders' equity was valued at:
Banana Ltd
Cherry Ltd
Share capital
75,000
20,000
General reserve
10,000
1,000
Retained earnings
16,000
4,500
The financial statements of the entities within the group at 30 June 2020 are as follows:
Apple Ltd:
Total assets
295,000
Total liabilities
126,000
Share capital
100,000
General reserve
30,000
Retained earnings
39,000
Banana Ltd:
Debentures in Cherry Ltd
20,000
Total assets
147,000
Total liabilities
17,750
Share capital
75,000
General reserve
16,250
Retained earnings
38,000
Cherry Ltd:
Total assets
66,500
Debentures
25,000
Total liabilities
30,250
Share capital
20,000
General reserve
2,250
Retained earnings
14,000
The tax rate is 30%. All non-controlling interest are valued at the proportionate share of the acquiree's identifiable net assets. Inventory on hand at 30 June 2020 included goods obtained from within the group as follows:
-Apple Ltd purchased from Banana Ltd, sale price was $10,000 and cost $7,500.
-Apple Ltd purchased from Cherry Ltd, sale price was $20,000 and cost $18,500.
-Banana Ltd purchased from Cherry Ltd, sale price was $15,000 and cost $13,800.
The directors had applied the impairment test for goodwill annually and determined that a write-down of $3,090 is required for consolidation purposes at 30 June 2020 (write-down of goodwill in Banana Ltd is $440 and write-down of goodwill in Cherry Ltd is $2,650) with the same amounts deemed to be attributable for the prior period. All debentures (including the debenture from Cherry Ltd to Banana Ltd) is due 30 June 2030.
Required:In the space provided - show goodwill entries, intragroup transactions and calculate direct and indirect non-controlling interest.
