12th December 2014

ABA301A ADVANCED ACCOUNTING

CHAPTER 3 PROBLEM 3.3 SOLUTIONS
Consolidation adjustment 20x1
Calculate the goodwill on consolidation
Fixed assets (FV $750,000> BV $600,000)
Inventory (FV $50,000 . BV $40,000)
Share capital
Retained earnings
Goodwill (Balancing Figure)
Accounts receivable (FV $70,000 , BV $100,000)
Investment in Subsidiary Co. (a)
Non-controlling interests (a)
Deferred tax liability ($150,000 + $10,000 $30,000) x 20%

Dr. $
150,000
10,000
320,000
250,000
576,000

30,000
1,000,000
250,000
26,000

b)
Impairment of goodwill I/S
Goodwill

50,000+

c)
Dividend income parent ($24,000 x 80%)
Non-controlling interests ($24,000 x 20%)
Dividend expenses subsidiary

19,200
4,800

d) (i)
Depreciation expenses I/S ($150,000 / 10years)
Accumulated depreciation

15,000+

Deferred Tax Assets ($150,000 / 10years x 20%)

Tax income I/S
d) (ii)
Cost of sales - I/S
Inventory
Deferred Tax Assets ($10,000 x 20%)
Tax income I/S
d) (iii)
Accounts receviable

Cr. $

50,000

24,000

15,000
3,000
3,000+

10,000+
10,000
2,000
2,000+

30,000

12th December 2014

Bad dabts I/S

Tax expenses I/S
Derferred Tax Liabilities ($30,000 x 20%)

30,000+
6,000+
6,000

Income to NCI I/S

Non-controlling interests
($80,000 - 50,000 15,000 + 3,000 10,000 + 2,000 + 30,000 6,000) x 20%

6,800
6,800

Parent Co.s group

Consolidated statement of comprehensive income for the year ended 31 December 20x1
Net profit before tax

Parent
550,000

Subsidiary
100,000

Less: Tax expenses

110,000

20,000

Net profit after tax

Less: Income to NCI

440,000

80,000

Less: dividend declared

100,000

24,000

Profit for the year

Retained earnings, 1/1/20x1

340,000
1,000,000

56,000
250,000

Retained earnings, 31/12/20x1

1,340,000

306,000

Adj.
50,000 19,200
15,000 10,000 +
30,000
+ 3,000(DEP) +
2,000(CGS)
6,000(B/D)

Total
585,800

131,000

- 6,800

454,800
6,800

- 24,000

448,000
100,000

- 250,000

348,800
1,000,000
1,348,800

12th December 2014

Consolidation adjustment 20x2

Calculate the goodwill on consolidation
Fixed assets (FV $750,000> BV $600,000)
Inventory (FV $50,000 . BV $40,000)
Share capital
Retained earnings
Goodwill (Balancing Figure)
Accounts receivable (FV $70,000 , BV $100,000)
Investment in Subsidiary Co. (a)
Non-controlling interests (a)
Deferred tax liability ($150,000 + $10,000 $30,000) x 20%

Dr. $
150,000
10,000
320,000
250,000
576,000

30,000
1,000,000
250,000
26,000

b)
Opening retained earnings
Non-controlling interests
Goodwill

40,000
10,000

c)
Opening retained earnings ($24,000 x 80%)
Non-controlling interests ($24,000 x 20%)
Opening retained earnings

19,200
4,800

d) (i)
Opening retained earnings ($150,000 / 10 years) x 80%
Non-controlling interest ($150,000 / 10 years) x 20%
Accumulated depreciation ($150,000 / 10 years)

12,000
3,000

Deferred Tax Assets ($15,000 x 20%)

Opening retained earnings ($15,000 x 20% x 80%)
Non-controlling interest ($15,000 x 20% x 20%)
d) (ii)
Opening retained earnings ($10,000 x 80%)
Non-controlling interests ($10,000 x 20%)
Inventory
Deferred Tax Assets ($10,000 x 20%)
Opening retained earnings ($10,000 x 20% x 80%)

Cr. $

50,000

24,000

15,000
3,000
2,400
600

8,000
2,000
10,000
2,000
1,600

12th December 2014

Non-controlling interest ($10,000 x 20% x 20%)

d) (iii)
Accounts receviable
Opening retained earnings ($30,000 x 80%)
Non-controlling interests ($30,000 x 20%)

400

30,000
24,000
6,000

Opening retained earnings ($30,000 x 20% x 80%)

Non-controlling interests ($30,000 x 20% x 20%)
Derferred Tax Liabilities ($30,000 x 20%)

4,800
1,200

Income to NCI I/S

Non-controlling interests
($306,000 250,000) x 20%

11,200

6,000

11,200