1. Question No.

01

Consolidation journal entries

Dr. Cr.
Initial acquisition journal
Goodwill 109,000
Share capital 380,000
General reserve 52,000
Retained earnings 40,000
Fair value adjustment for plant and machinery 21,000
Cost of investment 560,000

Unrealized profit - Inventory sold (Square to Navy)

Consolidate retained earnings 3,600
Consolidate inventory 3,600

Unrealized profit - Inventory sold (Navy to Square)

Consolidate retained earnings 13,000
Consolidate PPE- Plant 13,000

Additional deprecation provided for plant by Square

Consolidate retained earnings 1,040
Consolidate PPE- Plant ($13,000*8%) 1,040

Unrealized profit - Inventory sold (Navy to Square)

Consolidate retained earnings 4,000
Consolidate inventory 4,000
Square Ltd
Income statement for the year ending 31 December 2016

$
Sales revenue 847,000
Cost of sales (376,000)
Gross profit 471,000
Other income 30,000
Other expenses (56,000)
Profit before tax 438,920
Income tax expenses (104,000)
Profit after tax 334,920
Dividend declared (22,000)
Transfer to retained earrings 312,920

Square Ltd
Statement of financial position as at 31 December 2016

$ $
Non-current assets
Mortar vehicle 269,400
Plant and Machinery 300,000
Shares in Navy Ltd 560,000 1,129,400

Current assets
Inventories 158,800
Financial assets 140,000
Deferred tax asset 25,400
Account receivable 52,000
Bank 93,800 470,000
Total Assets 1,599,400

Equity
Share capital 1,000,000
General reserve 50,000
Asset revaluation surpluses 20,000
Retained earnings at 31 December 2016 392,920
Other component of equity 30,000 1,492,920

Current Liabilities
Deferred tax liability 12,480
Current tax liability 46,000
Account payable 48,000 106,480
Total Equity and Liability 1,599,400
Goodwill Calculation

Fair value of the consideration 560,000

Fair value of identifiable assets acquired and liability assumed
Share capital 380,000
General reserve 52,000
Retained earnings 40,000
Fair value adjustment for plant and machinery (21,000) (451,000)
Goodwill at acquisition date 109,000
Impairment -

2. Question No.02

Consolidation journal entries

Dr. Cr.
Initial acquisition journal
Goodwill 3,400
Share capital 120,000
General reserve 24,000
Retained earrings 16,000
Fair value adjustments 30,000
Shares in Hana Ltd 161,400
NCI 32,000

Additional depreciation - Plant

Other expenses 4,000
Plant 4,000

Unrealized profit - Inventory sold

Consolidate retained earnings 320
Non-Controlling interest 80
Consolidate inventory 400

Unrealized profit - Inventory sold

Consolidate retained earnings 4,000
Non-Controlling interest 1,000
Consolidate inventory 5,000