QUESTION

Using the information below and on the next two pages, prepare the following as at 30th June 2014:

PART A: Adjustment/elimination journal entries for consolidation at that date; and

PART B: Detailed calculation of non-controlling interest balance and consolidation worksheet; and

PART C: Consolidated financial statements and statements of changes in equity for the group and parent.

INFORMATION

For the year ended 30 June 2012:

1. On 1 July 2011 Harbour Ltd created a group entity when it purchased 80% of the issued capital of Bridge Ltd for $440,000 cash. On acquisition Bridge Ltd's accounts showed: Share capital $300,000 and Retained earnings $125,000. All assets and liabilities appearing in Bridge Ltd's financial statements were fairly valued, except:

• An item of Bridge Ltd's plant, that had originally cost $157,000 and had a carrying value of $100,480, was undervalued by $30,000. The plant was still on hand at 30 June 2014.
• Bridge Ltd had an internally developed identifiable intangible asset, a patent, with a fair value of $35,000.

During the year Bridge Ltd made sales of inventory to Harbour Ltd of $70,200. Harbour Ltd's closing inventories on 30 June 2012 included $33,600 bought from Bridge Ltd (which included the intragroup mark-up on original cost price).

For the year ended 30 June 2013:

2. On 1 January 2013 it was decided that goodwill acquired in Bridge Ltd should be marked down at a rate of 10% per annum from this date forward (% based on the original value you calculated at acquisition).

3. Also on 1 January 2013 Harbour Ltd sold plant to Bridge Ltd for $35,000. This was financed by a short-term interest-free loan from Harbour Ltd. The plant had originally cost $82,000 when purchased on 1 January 2010.

Harbour Ltd declared and paid dividends of $50,000 for the year. Bridge Ltd did not declare or pay any dividends for the year.

For the year ended 30 June 2014:

4. During the year Bridge Ltd made sales of inventory to Harbour Ltd of $88,100.

5. Harbour Ltd's inventories included the following amounts bought from Bridge Ltd (which included the intragroup mark-up on original cost price): Closing inventory on 30 June 2014 was $13,300; and Opening inventory on 1 July 2013 was $9,100.

6. Harbour Ltd charged management fees to Bridge Ltd.

7. Dividends were declared/paid by both companies.

8. Non-controlling interests to be recognized.

ADDITIONAL INFORMATION:

• The company tax rate is currently 30% and it has been this rate for many years.
• Harbour has the following accounting policies for the group:

(i) Revaluation adjustments on acquisition are to be made on consolidation only, not in the books of  any subsidiary;

(ii) Non-controlling interests are measured at the proportionate share of a subsidiary's identifiable net assets;

(iii) Intragroup sales of inventory to be at a markup of 40% on cost;

(iv) Plant is depreciated using the diminishing value method at a rate of 20% p.a. (also known as the    declining-balance or diminishing-balance method); and

(v) All calculated amounts to be rounded to the nearest whole dollar.