Question: on 1 july 2019 errol ltd acquired 75percent of the...
On 1 July 2019, Errol Ltd acquired 75% of the issued shares of Flynn Ltd for $503 000 when the equity of Flynn Ltd consisted of the following:
Share capital $320 000
General reserve $80 000
Retained earnings $160 000
At this date, all identifiable assets and liabilities of Flynn Ltd were recorded at fair value except for the following:
Inventories CA$180 0001 FV$196 000
Machinery (cost $200 000) CA$140 000 FV$164 000
Land CA$200 000 FV$280 000
All the inventories were sold by 30 June 2020. The Machinery has a further 3‐year life beyond 1 July 2019, with benefits to be received evenly over this period. The land was sold on 1 March 2022 for $300 000. Adjustments for the differences between carrying amounts and fair values are to be made in the consolidation worksheet except for land which is to be measured in Flynn Ltd’s accounts at fair value. Errol Ltd uses the partial goodwill method. The tax rate is 30%.
1. Prepare the consolidation worksheet entries as at 1 July 2019.
This is what i have worked out so far, is this correct?: How do you set the NCI credit amount in the NCI pre-acq entry that i have noted with a '?' if it isn't stated in the question (normally the question will state NCI interest is $...).
NFVIAL parent = $644,000x0.75
NFVIAL NCI = 644,000x0.25
Consid parent = $503,000
Goodwill parent = $503,000-483,000
(Record inventory at FV)
Accumulated depreciation 60,000
(Write off depreciation for machinery)
(Record machinery at FV)
(Record land at FV)
Share capital 240,000
General reserve 60,000
Retained earnings 160,000
Shares in Flynn Ltd 503,000
(Pre-acquisition entry at 1/7/19).
Share capital 80,000
General reserve 20,000
Retained earnings 40,000
(NCI pre-acquisition entry)