Homework answers / question archive / The following three entities make up an economic group as follows: Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000

The following three entities make up an economic group as follows: Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000

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The following three entities make up an economic group as follows:

Apple Ltd purchased 60% of the shares totalling $65,000 in Banana Ltd and Banana Ltd wholly owns Cherry Ltd which was purchased for $52,000. Both investments were acquired on 1 July 2018. On this date, shareholders' equity was valued at:

 

Banana Ltd Cherry Ltd

Share capital 75,000 20,000

General reserve 10,000 1,000

Retained earning 16,000 4,500

The financial statements of the entities within the group at 30 June 2020 are as follows:

 

Apple Ltd:

Total assets 295,000

Total liabilities 126,000

Share capital 100,000

General reserve 30,000

Retained earnings 39,000

 

Banana Ltd:

Debentures in Cherry Ltd20,000

Total assets 147,000

Total liabilities 17,750

Share capital 75,000

General reserve 16,250

Retained earnings 38,000

 

Cherry Ltd:

Total assets 66,500

Debentures 25,000

Total liabilities 30,250

Share capital 20,000

General reserve 2,250

Retained earnings 14,000

 

The tax rate is 30%. All non-controlling interest are valued at the proportionate share of the acquiree's identifiable net assets. Inventory on hand at 30 June 2020 included goods obtained from within the group as follows:

-Apple Ltd purchased from Banana Ltd, sale price was $10,000 and cost $7,500.

-Apple Ltd purchased from Cherry Ltd, sale price was $20,000 and cost $18,500.

-Banana Ltd purchased from Cherry Ltd, sale price was $15,000 and cost $13,800.

The directors had applied the impairment test for goodwill annually and determined that a write-down of $3,090 is required for consolidation purposes at 30 June 2020 (write-down of goodwill in Banana Ltd is $440 and write-down of goodwill in Cherry Ltd is $2,650) with the same amounts deemed to be attributable for the prior period. All debentures (including the debenture from Cherry Ltd to Banana Ltd) is due 30 June 2030.

 

Required:

In the space provided - show goodwill entries, intragroup transactions and calculate direct and indirect non-controlling interest.