QUESTION 1 On 1 July 2012, Johnson Ltd acquires all shares in David Ltd for $800 000. The fair value of net assets acquired is $920 000 comprised of $600,000 in share capital and $320 000 in retained earnings. What is the appropriate elimination entry for this investment that is in accordance with AASB 3 "Business Combinations" and AASB 127 "Consolidated and Separate Financial Statements"?

QUESTION 2 On 1 July 2012, Bob Ltd acquires 80% of all shares in Ted Ltd for $800 000. The fair value of net assets acquired is $500 000 comprised of $400,000 in share capital and $100 000 in retained earnings. What is the appropriate elimination entry for this investment that is in accordance with AASB 3 "Business Combinations" and AASB 127 "Consolidated and Separate Financial Statements"?

QUESTION 3 On 1 July 2012, Felix Ltd acquires all shares in Oscar Ltd for $800 000. The fair value of net assets acquired is $620 000 comprised of $400,000 in share capital and $220 000 in retained earnings. What is the appropriate elimination entry for this investment that is in accordance with AASB 3 "Business Combinations" and AASB 127 "Consolidated and Separate Financial Statements"?

QUESTION 4 Monster Co Ltd owns 100 per cent of the issued shares of Mini Co Ltd. Mini Co Ltd declared a dividend of $100,000 for the period ended 30 June 2004. Monster Co Ltd accrues dividends when they are declared by its subsidiaries. What elimination entry would be required to prepare the consolidated financial statements for the group for the period ended 30 June 2005?

QUESTION 5 On 1 July 2012, Carol Ltd acquires all shares in Alice Ltd for $400 000. The fair value of net assets acquired is $320 000 comprised of $200,000 in share capital and $120 000 in retained earnings. On the date of purchase, a contingent liability is not recoded in the books of the acquiree but assumed by the acquirer. The contingent liability is estimated at $20 000 and likely to eventuate after acquisition. What is the appropriate elimination entry for this investment that is in accordance with AASB 3 "Business Combinations" and AASB 127 "Consolidated and Separate Financial Statements"?

QUESTION 6 Forest Ltd purchased all the issued capital of Shrub Ltd on 1 July 2005 for cash consideration of $1 million. The fair value of Shrub Ltd's net assets at that date was $1 million made up of:

Share capital $750,000 Retained earnings $250,000 Total equity $1,000,000

During the period ended 30 June 2006, Shrub Ltd declare a dividend of $100,000 out of pre-acquisition earnings. What consolidation journal entries would be required to prepare group accounts for the period?

QUESTION 7 Meat Ltd purchased 100 per cent of the issued capital of Pastry Ltd for a cash consideration of $2.1 million on 1 July 2005. At that time the fair value of the net assets of Pastry Ltd were represented by:

Share capital $1,700,000 Retained earnings $ 300,000 $2,000,000

Goodwill had been determined to have been impaired by $ 5000 during the period.

During the period ended 30 June 2006 Pastry Ltd sold inventory that cost $190,000 for $300,000 to Meat Ltd. Sixty percent of this inventory remains on hand in Meat Ltd at the end of the year. Both companies use a perpetual inventory system. The taxation rate is 30 per cent.

What consolidation journal entries are required for the period ending 30 June 2006?

QUESTION 8 French Ltd purchased 100 per cent of the issued capital of Pie Ltd for a cash consideration of $1.7 million on 1 July 2004. At that time the fair value of the net assets of Pie Ltd were represented by:

Share capital $1,000,000 Retained earnings $ 500,000 $1,500,000

Goodwill had been determined to have been impaired by $20,000 during the period. During the period ended 30 June 2005 Pie Ltd sold inventory that cost $450,000 for $620,000 to French Ltd. Twenty percent of this inventory remains on hand in French Ltd at the end of the year. Both companies use a perpetual inventory system. The taxation rate is 30 per cent. At the end of the period Pie Ltd declared a dividend of $45,000 that has not yet been paid. What consolidation journal entries are required for the period ending 30 June 2005?

QUESTION 9 French Ltd owns 100 per cent of the issued capital of Pastry Ltd. During the period ended 30 June 2006 Pastry Ltd sold inventory that cost $190,000 for $300,000 to French Ltd. Sixty per cent of this inventory remains on hand in French Ltd at the end of that year. Both companies use a perpetual inventory system. The taxation rate is 30 per cent.

What consolidation journal entries are required in relation to the inter-company transaction for the period ending 30 June 2007?

QUESTION 10 Belgium Ltd owns all the issued capital of Chocolate Ltd. During the period ended 30 June 2005 Belgium Ltd sold Chocolate Ltd inventory that had a cost of $200,000 for $270,000. At the end of the current period Chocolate Ltd had 75 per cent of that inventory still on hand; the rest was sold to entities external to the group. During the previous period Chocolate Ltd had sold inventory to Belgium Ltd at a profit of $49,000.

At the end of that period (30 June 2004) Belgium Ltd still had 40 per cent of that inventory on hand. That entire inventory was sold to parties external to the group during the current year. The taxation rate is 30 per cent and both companies use a perpetual inventory system.
What consolidation journal entries are required to eliminate the effects of these transactions for the period ended 30 June 2005?

QUESTION 11 Zeus Ltd owns 100 per cent of the issued capital of Ares Ltd. On 1 July 2005 Zeus Ltd purchased an item of equipment from Ares Ltd for $800,000. Ares had owned the equipment for 2 years. It originally cost $890,000 and the accumulated depreciation was $178,000 at the time of sale. The equipment has been depreciated over this time, but not written down or revalued. The remaining useful life of the equipment at 1 July 2005 is estimated to be 8 years. Zeus Ltd expects the benefits to be obtained from the equipment to be evenly received over its useful life. The tax rate is 30 per cent.

What are the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2006?

QUESTION 12 Johnson Ltd owns all the share capital of Grace Ltd. (a) On 1 January 2008, Grace Ltd sold a new tractor to Johnson Ltd for $20,000. This had cost Grace Ltd $16,000 on that day. Johnson used the tractor as a noncurrent asset, and charged depreciation at the rate of 10% p.a. (b) A non-current asset with a carrying amount of $1,000 was sold by Johnson Ltd to Grace Ltd for $800 on 1/1/2010. Grace Ltd intended to use this item as inventory, being a seller of second-hand goods. Both entities charged depreciation at the rate of 10% p.a. on non-current assets. The item was still on hand at 30 June 2010. (c) During March 2010, Grace Ltd declared $3,000 dividend and paid it in August 2010. (d) Grace Ltd rented a spare warehouse to Johnson Ltd. The total rent charged and paid was $30,000. For each of the above intra-group transactions, assume that the consolidation process is being undertaken at 30 June 2010, and that an income tax rate of 30% applies. Prepare the consolidation adjustment entries for these transactions.

QUESTION 13 Zeus Ltd owns 100 per cent of the issued capital of Ares Ltd. On 1 July 2005 Zeus Ltd purchased an item of equipment from Ares Ltd for $800,000. Ares had owned the equipment for 2 years. It originally cost $890,000 and the accumulated depreciation was $178,000 at the time of sale. The equipment has been depreciated over this time, but not written down or revalued. The remaining useful life of the equipment at 1 July 2005 is estimated to be 8 years. Zeus Ltd expects the benefits to be obtained from the equipment to be evenly received over its useful life. The tax rate is 30 per cent.

What is the consolidation journal entries required for this inter-company transaction for the period ended 30 June 2007?

QUESTION 14 Melbourne Ltd purchased 100 per cent of the issued capital of Perth Ltd for a cash consideration of $3.8 million on 1 July 20 x

1. At that time the book value of the net assets of Perth Ltd were represented by:

Share capital $2,700,000 Retained earnings 300,000 $3,000,000

The fair value of the Land continuously held by Perth Ltd should be $500,000 more than book value.

During the period ended 30 June 20x3 Perth Ltd sold inventory that cost $190,000 for $300,000 to Melbourne Ltd. 60% of this inventory remains on hand in Melbourne Ltd at the end of that year. On 30 June 20x4, 20% of this inventory (book value of $60,000) remains on hand in Melbourne Ltd. Both companies use a perpetual inventory system. The taxation rate is 30 per cent.

What consolidation journal entries are required for the period ending 30 June 20 x 4?

QUESTION 15 On 1 July 2005 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: Share capital $2,000,000 Retained earnings 500,000 $2,500,000 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 2006. 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 minority interest in equity as at 30 June 2006?

QUESTION 16 Apple Ltd owns all the issued capital of Pear Ltd. On 1 July 2004 Pear Ltd purchased an item of plant from Apple Ltd for $1,000,000. Apple Ltd had owned the plant for 5 years. It originally cost $1,350,000 and the accumulated depreciation at 1 July 2004 is $562,500. The remaining useful life of the equipment on the date of sale to Pear Ltd is estimated to be 7 years. The pattern of benefits is expected to be obtained from the equipment evenly over its useful life. The tax rate is 30 per cent. Round all calculations to the nearest dollar.

What are the consolidation journal entries required for this inter-company transaction for the periods ended 30 June 2006 and 30 June 2007?

QUESTION 17 Green Ltd purchased 90 per cent of the issued capital and in the process gained control over Maroon Ltd on 1 July 2005. The fair value of the net assets of Maroon Ltd at purchase was represented by:

Share capital $3,220,000 + Retained earnings $740,000 = $3,960,000

Green Ltd paid cash consideration of $3,700,000 for Maroon Ltd. During the period ended 30 June 2007, Maroon Ltd paid management fees of $100,000 to Green Ltd and Maroon had an operating profit of $405,000. Maroon Ltd declared a dividend of $98,000 during the period. Green purchased inventory from Maroon during the period ended 30 June 2007 for $100,000. The inventory cost Maroon Ltd $85,000 and at the end of the period Green had 35 per cent of that inventory still on hand. Maroon's opening retained earnings for the period ended 30 June 2007 was $810,000. Goodwill has been determined to have been impaired by $13,600. Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries. There were no other inter-company transactions. Ignore tax implications.

For the period ended 30 June 2007, what consolidation journal entries are required and what is the outside equity interest?