Giant Ltd acquired 80 percent share capital of Expert Ltd. On 1 July 2018 for a cost of $1,600,000. As at the date of acquisition, all assets and liabilities of Expert Ltd were fairly valued except a land that has a carrying value of $150,000 less than the fair value. The recorded balance of equity of Expert Ltd as at 1 July 2018 were as: Share capital $ 800,000 Retained earnings $200,000 General Reserve. $ 400,000 Total $1,400,000 Additional information: The management of Giant Ltd values non-controlling interest at the proportionate share of ExpertLtd identifiable net assets. Expert Ltd has a profit after tax of $200,000 for the year ended 30 June 2019. During the financial year to 30 June 2019, Expert Ltd sold inventory to Giant Ltd for a price of $120,000. The inventory costs Expert Ltd $60,000 to produce. 25 percent of the inventory is still on the hand of Giant Ltd as at 30 June 2019. During the year Expert Ltd paid $60,000 in consultancy fees to Giant Ltd. On 1 July 2018, Expert Ltd sold an item of plant to Giant Ltd $80000. The equipment had a carrying value of $60,000 (Cost $100,000, accumulated depreciation $40,000). At the date of sale, it was expected that the equipment had a remaining life of 4 years and no residual value. The tax rate is 30 percent. Required: Based on the above information, calculate the non-controlling interest as at 30 June 2019. Prepare the necessary journal entries to recognize the non-controlling interest as at 30 June 2019

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Giant Ltd acquired 80 percent share capital of Expert Ltd. On 1 July 2018 for a cost of $1,600,000. As at the date of acquisition, all assets and liabilities of Expert Ltd were fairly valued except a land that has a carrying value of $150,000 less than the fair value. The recorded balance of equity of Expert Ltd as at 1 July 2018 were as:

Share capital $ 800,000

Retained earnings $200,000

General Reserve. $ 400,000

Total $1,400,000

Additional information:

The management of Giant Ltd values non-controlling interest at the proportionate share of ExpertLtd identifiable net assets.
Expert Ltd has a profit after tax of $200,000 for the year ended 30 June 2019.
During the financial year to 30 June 2019, Expert Ltd sold inventory to Giant Ltd for a price of $120,000. The inventory costs Expert Ltd $60,000 to produce. 25 percent of the inventory is still on the hand of Giant Ltd as at 30 June 2019.
During the year Expert Ltd paid $60,000 in consultancy fees to Giant Ltd.
On 1 July 2018, Expert Ltd sold an item of plant to Giant Ltd $80000. The equipment had a carrying value of $60,000 (Cost $100,000, accumulated depreciation $40,000). At the date of sale, it was expected that the equipment had a remaining life of 4 years and no residual value.
The tax rate is 30 percent.

Required:

Based on the above information, calculate the non-controlling interest as at 30 June 2019.
Prepare the necessary journal entries to recognize the non-controlling interest as at 30 June 2019.

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