On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for $1,800,000, and on that date Queen Ltd.'s equity were as follows: Share capital $1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000. All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July 2021. During the financial year 2022, the following intragroup transactions occurred between King Ltd and Queen Ltd: Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost. The land was still hold by King Ltd. King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate of 10% p.a. on cost. Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. 4th of the inventories were still on hand with King Ltd. King Ltd received $15,000 of service revenue from Queen Ltd. Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd. The tax rate is 30 per cent. Required: Show the relevant consolidated journal entries to eliminate investment in Queen Ltd and intragroup transactions for the year ended 30 June 2022 (including tax effects where relevant).

On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for $1,800,000, and on that date Queen Ltd.'s equity were as follows: Share capital $1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000. All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July 2021. During the financial year 2022, the following intragroup transactions occurred between King Ltd and Queen Ltd: Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost. The land was still hold by King Ltd. King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate of 10% p.a. on cost. Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. 4th of the inventories were still on hand with King Ltd. King Ltd received $15,000 of service revenue from Queen Ltd. Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd. The tax rate is 30 per cent. Required: Show the relevant consolidated journal entries to eliminate investment in Queen Ltd and intragroup transactions for the year ended 30 June 2022 (including tax effects where relevant).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: On 1 July 2023, Supplyco Ltd provides Grove Ltd with some inventory, which has a fair value of $200…

A: Journal: Recording of a business transactions in a chronological order.

Q: Marie Bhd acquired 80% of Donny Bhd ordinary share capital on 1 January 2019. As at 31 December…

A: WE SHOW DEBTOR AND CREDITOR BALANCES OF OUTSIDERS ONLY . IN CONSOLIDATED ACCOUNTS INTRA DUES AND…

Q: On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for…

A: We will do acquisition analysis by calculating Net assets and good will, Net assets is calculated…

Q: Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions…

A: When a company acquires another company, it’s called consolidation or merger. The company which…

Q: On January 1, 2021, Entity F acquired 25% of the shares of Pot, Inc. for P425,000. At this date all…

A: Carrying amount of the investment in Pot, Inc. as of December 31,2021 will be calculated as follows:…

Q: On 1 July 2021, James Ltd acquired all the issued shares of Dean Ltd for $350,000. At this date, the…

A: Introduction: Acquisition analysis is done in three main steps: planning, search and screening, and…

Q: On 1 July 2019, Quick Buck Ltd took control of the assets and liabilities of Eldorado Ltd. Quick…

A: A journal entry is the recording of financial transactions in books of the business entity. It…

Q: On 1 July 2020, Sky Ltd acquired 70% of the share capital (ex. div.) of Jim Ltd for $500,000. At…

A: Part 2: ExplanationIn Step 1, we calculated the NCI share of Jim Ltd's equity on the acquisition…

Q: On 1 July 2019, Quick Buck Ltd took control of the assets and liabilities of Eldorado Ltd. Quick…

A: Goodwill = Purchase Consideration - Net identifable assets Where, Net identifable assets = Total…

Q: On 30 June 2022, Southside Ltd purchased 5000 corporate bonds in ABC Ltd at $10.00 per bond. On…

A: It is one of the primary financial statements used in accounting and financial reporting. It…

Q: Dog Ltd acquired all the issued share capital of Fish Ltd on 1 July 2019 for cash $2,250,000. At the…

A: Consolidation As per the consolidation rule when parents get full/partial control over the…

Q: On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the…

Q: On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these…

A: Acquisition costs- The acquisition cost is defined as the total cost of acquiring an asset. The cost…

Q: ABC and XYZ Inc had the following balance sheets on December 31, 2021: (see image below) On January…

A: Considerations Paid 40000 Current Assets - 26000 Fixed Assets - 54000

Q: Sky Ltd acquired all the issued shares of Jupiter Ltd on 1 January 2019. The following transactions…

A: The journal entry can be defined as the process to record the business transaction in the accounting…

Q: Required: 1. Prepare the acquisition analysis in relation to the acquisition to determine the gain…

Q: On 1 July 2019, Christina Ltd acquired all the issued shares of Adeline Ltd, paying $120 000 cash…

A: acquisition analysis at 1 July 2019 A-Consideration transferred Shares $120,000…

Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for
$1,800,000, and on that date Queen Ltd.'s equity were as follows: Share capital
$1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000.
All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July
2021.
During the financial year 2022, the following intragroup transactions occurred
between King Ltd and Queen Ltd:
Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost.
The land was still hold by King Ltd.
King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of
equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate
of 10% p.a. on cost.
Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. 1/4th of the
inventories were still on hand with King Ltd.
King Ltd received $15,000 of service revenue from Queen Ltd.
Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd.
The tax rate is 30 per cent.
Required:
Show the relevant consolidated journal entries to eliminate investment in Queen
Ltd and intragroup transactions for the year ended 30 June 2022 (including tax
effects where relevant).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

On 1 July 2019, Brad Ltd acquired all assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1,000. Legal cost associated with the acquisition of Pitt Ltd amounted to $1,200.The assets and liabilities of Pitt Ltd at 1 July 2019 were as follows:Carrying Amount ($) Fair Value ($)AssetsCash 2,000 2,000Accounts receivable 10,000 10,000Inventory 64,000 68,000Equipment 320,000 232,000Accumulated depn - Equipment (96,000) -Patents 280,000 280,000LiabilitiesAccounts payable (16,000) (16,000)Debentures (64,000) (64,000)Required:a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.b) Prepare the journal entries in the records of Brad Ltd at 1 July 2019.
On 1 July 2019, Christina Ltd acquired all the issued shares of Adeline Ltd, paying $120 000 cash and transferring 100 000 of its own shares to Adeline Ltd’s former shareholders. At that date, the financial statements of Adeline Ltd showed the following information. Share Capital $100000 General Reserve 50000 Retained Earnings 150000 All the assets and liabilities of Adeline Ltd were recorded at amounts equal to their fair values at the acquisition date. The fair value of Christina Ltd’s shares at acquisition date was $2 per share. Christina Ltd incurred $30 000 in acquisition‐related costs that included $5000 as share issue costs. Required Prepare the acquisition analysis at 1 July 2019. Prepare the journal entries for Christina Ltd to recognise the investment in Adeline Ltd at 1 July 2019. Prepare the consolidation worksheet entries for…
On 1 July 2023, Supplyco Ltd provides Grove Ltd with some inventory, which has a fair value of $200 000. In exchange for the inventory, Grove Ltd provides Supplyco Ltd with 20 000 shares in Grove Ltd. REQUIRED Provide the accounting entry to account for the above equity-settled share-based transaction.
On 1 July 2021, James Ltd acquired all the issued shares of Dean Ltd for $350,000. At this date, the financial statements of Dean Ltd showed the following: $ Share capital 270,000 Retained earnings 26,500 General Reserve 8,800 Total equity 305,300 Goodwill 25,000 At acquisition date, all the net identifiable assets and liabilities in Dean Ltd were recorded at amounts equal to their fair value except for: Asset Carrying amount ($) Fair Value ($) Inventories 15,000 18,000 Plant (cost $400,000) 210,000 220,000 The Plant was calculated to have a further life of 5 years, and was depreciated on a straight-line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: Prepare the acquisition analysis at 1 July 2021. Prepare the consolidation entries at acquisition date, 1 July 2021. Include narrations for each entry. Prepare the consolidation worksheet as at 1 July 2021. Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2021 in narrative format.
Prepare the journal entries in the record of Bead Ltd assuming that the shares issued by Brad Ltd had a fair value of $ 4.80
On 1 July 2022, Kangeroo Ltd acquired all the issued shares of Koala Ltd, paying $60,000 cash and transferring 50,000 of its own shares to Koala Ltd's former shareholders. At that date, the financial statements of Koala Ltd showed the following information. Equity portion of Statement of Financial Position as at 1 July 2020: Share capital $50 ,000 General reserve 50 ,000 Retained earnings 80 ,000 All the assets and liabilities of Koala Ltd were recorded at amounts equal to their fair values at the acquisition date. The fair value of Kangeroo Ltd's shares at acquisition date was $3 per share. Kangeroo Ltd incurred $17,500 in acquisition-related costs that included $5,000 as share issue costs. Prepare the acquisition analysis at 1 July 2022 and the journal entries for Kangeroo Ltd to recognise the investment in Koala Ltd at 1 July 2022. and also Prepare the consolidation worksheet entries for Kangeroo Ltd's group at 1 July 2022.
On 30 June 2022, Southside Ltd purchased 5000 corporate bonds in ABC Ltd at $10.00 per bond. On acquisition, Southside Ltd classified this investment in financial assets as being ‘measured at fair value through other comprehensive income’. At 30 June 2023, the fair value of the corporate bonds had increased to $14.00. At 30 June 2024 the fair value of the corporate bonds had decreased to $13.00. All of the corporate bonds were sold on 30 June 2024. At 30 June 2022, the only equity item was paid-up capital of $100 000. And this has not changed. The applicable tax rate is 30 per cent.REQUIREDPrepare an extract of the statement of profit or loss and other comprehensive income, and statement of changes in equity, for the reporting period ending 30 June 2024 in which the reclassification adjustment for financial assets measured at fair value through other comprehensive income is detailed.
On 1 July 2020, Sky Ltd acquired 70% of the share capital (ex. div.) of Jim Ltd for $500,000. At that date, the relevant balances in the records of Jim Ltd were: Share capital General reserve Retained earnings Dividend payable S 434,000 35,000 126,000 14,000 At the date of acquisition all assets and liabilities of Jim Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets: Carrying amount Fair value Land Machine 56,000 30,800 Land was sold on 1 May 2023 for $77,000. $ 67,200 49,000 The cost of the Machine was $58,800 and had a further 5-year life as at the date of acquisition. Jim Ltd had reported a Contingent liability at 1 July 2020 in relation to claims by customers for damaged goods. Sky Ltd placed a fair value of $12,600 on these claims at acquisition date. This claim was settled on 1 April 2023 for $7,000. Additional information: a) On 1 March 2023, Jim Ltd purchased inventory from Sky Ltd for $25,200,…
On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the statement of financial position of Syd Ltd was as follows: Required Prepare the journal entries in the records of Mel Ltd at 1 July 2021 in each of the following situations, assuming the costs of issuing the shares by Mel Ltd cost $1600. Mel Ltd issued 80 000 shares having a fair value of $2.40 per share in exchange for the net assets of Syd Ltd Mel Ltd issued 80 000 shares having a fair value of $2.00 per share in exchange for the net assets of Syd Ltd. Mel Ltd acquired the shares of Syd Ltd. The agreement was that Mel Ltd would pay the shareholders of Syd Ltd one share in Mel Ltd for every two shares held in Syd Ltd plus $1 in cash for each share held in Syd Ltd. Shares in Mel Ltd have a fair value of $1.80 per share.
On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the statement of financial position of Syd Ltd was as follows: Required Prepare the journal entries in the records of Mel Ltd at 1 July 2021 in each of the following situations, assuming the costs of issuing the shares by Mel Ltd cost $1600. Mel Ltd issued 80 000 shares having a fair value of $2.40 per share in exchange for the net assets of Syd Ltd Mel Ltd issued 80 000 shares having a fair value of $2.00 per share in exchange for the net assets of Syd Ltd. Mel Ltd acquired the shares of Syd Ltd. The agreement was that Mel Ltd would pay the shareholders of Syd Ltd one share in Mel Ltd for every two shares held in Syd Ltd plus $1 in cash for each share held in Syd Ltd. Shares in Mel Ltd have a fair value of $1.80 per share.
On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Pitt Ltd amounted to $1200. The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows: Carrying amount Fair value Assets $ 2000 10000 64 000 320 000 $ 2000 10000 Cash Accounts receivable 68 000 232 000 Inventories Equipment Accumulated depreciation – equipment (96 000) 240 000 Patents 280 000 Liabilities (16 000) (64 000) Accounts payable (16000) (64 000) Debentures Required (a) Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.
On September 1, 2019, Pelican Ltd exchanged 10,000 ordinary shares held in treasury for a used machine. The treasury shares were acquired by Pelican at a cost of P40 per share, and are accounted for under the cost method. On the date of the exchange, the ordinary shares had a fair value of P55 per share (the shares were originally issued at P30 per share). As a result of this exchange, Pelican's total equity will increase by P100,000. P400,000. P150,000. P550,000.