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%.

Required

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 $...).

 

Acquisition analysis:

320,000+80,000+160,000+(16,000x0.7)+(24,000x0.7)+(80,000x0.7)

NFVIAL parent = $644,000x0.75

                          =$483,000

 

NFVIAL NCI = 644,000x0.25

                     = $161,000

Consid parent = $503,000

Goodwill parent = $503,000-483,000

 

                             = $20,000

BCVR entries:

Inventory                                                                                                  16,000

              DTL                                                                                                                                        4,800   

              BCVR                                                                                                                                      11,200

(Record inventory at FV)

 

Accumulated depreciation                                                                    60,000                                                           

              Machinery                                                                                                                             60,000

(Write off depreciation for machinery)

 

Machinery                                                                                                24,000

              DTL                                                                                                                                         7,200

              BCVR                                                                                                                                      16,800

(Record machinery at FV)

 

Land                                                                                                          80,000

              DTL                                                                                                                                          24,000

              BCVR                                                                                                                                      56,000

(Record land at FV)

 

Pre-acquisition entry:

Share capital                                                                                            240,000

General reserve                                                                                      60,000

Retained earnings                                                                                   160,000

BCVR                                                                                                         23,000 

Goodwill                                                                                                   20,000 

              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

BCVR                                                                                                         ?

              NCI                                                                                                                                          ?

(NCI pre-acquisition entry)