Consolidated Financials: Parent-Subsidiary Consolidation Analysis

This assignment solution focuses on the preparation of consolidated financial statements for an economic entity comprising a parent and subsidiary. It includes detailed journal entries to eliminate intercompany transactions, such as sales revenue, cost of goods sold, management fees, and dividends. The solution addresses unrealized profits in opening and closing inventory, along with the associated deferred tax assets. It also covers the elimination of gains from the sale of equipment. The assignment further includes the calculation of non-controlling interest at acquisition and during the reporting period. The solution provides a statement of financial position at 30 June 2019, with standalone and consolidated figures, incorporating adjustments and eliminations. The assignment also includes the computation of goodwill on the acquisition of the subsidiary and the recognition of impairment. The solution is well-structured, with clear workings, journal entries, and explanations, demonstrating a comprehensive understanding of consolidation accounting principles.

CONSOLIDATED FINANCIALS 1
CONSOLIDATED
FINANCIALS

CONSOLIDATED FINANCIALS 2
Journal Entries
S. No. Entry
D
r.
/
C
r.
$
00
0
$
000 Remarks
1 Impairment A/c
Dr
. 5
To Goodwill A/c
Cr
. 5
(Recognising impairment on Goodwill
on consolidation)
2 Sales Revenue
Dr
. 60
To Cost of Goods Sold
Cr
. 60
(Elimination of sales made by FMCG
Ltd to RG Ltd)
3 Sales Revenue
Dr
. 50
To Cost of Goods Sold
Cr
. 50
(Elimination of sales made by RG Ltd to
FMCG Ltd)
4 Management Fee Income
Dr
. 26
To Management Fee Expenses
Cr
. 26
(Elimination of Management Fee paid
by RG Ltd to FMCG Ltd)
5 Dividend Income
Dr
. 75
To Dividend Paid
Cr
. 75
(Elimination of Dividend paid by RG
Ltd to FMCG Ltd)
6 Retained earnings
Dr
. 5
balancing
figure
Tax Expense Dr
.
2 30% * ($
40000 - $

CONSOLIDATED FINANCIALS 3
30000)
To Cost of Goods Sold - Opening
Inventory
Cr
. 7
$ 40000 -
$ 30000
(Elimination of Unrealised profit from
Opening Inventory of FMCG Ltd, net of
tax)
7 Cost of Goods Sold - Closing Inventory
Dr
. 6
$ 33000 -
$ 27000
To Inventory
Cr
. 6
$ 33000 -
$ 27000
(Elimination of Unrealised profit from
Closing Inventory of FMCG Ltd)
8 Deferred Tax Asset
Dr
. 2
30% * ($
33000 - $
27000)
To Tax Expense
Cr
. 2
30% * ($
33000 - $
27000)
(Recognising Deferred Tax Asset on
Unrealised Profit in the Closing
Inventory of FMCG Ltd)
9 Cost of Goods Sold - Closing Inventory
Dr
. 3
$ 12000 -
$ 9000
To Inventory
Cr
. 3
$ 12000 -
$ 9000
(Elimination of Unrealised profit from
Closing Inventory of RG Ltd)
10 Deferred Tax Asset
Dr
. 1
30% * ($
12000 - $
9000)
To Tax Expense
Cr
. 1
30% * ($
12000 - $
9000)
(Recognising Deferred Tax Asset on
Unrealised Profit in the Closing
Inventory of RG Ltd)
11 Equipment
Dr
. 12
$ 132000 -
$ 120000
Gain on Sale of Equipment
Dr
. 40
$ 120000 -
$ 80000

CONSOLIDATED FINANCIALS 4
To Accumulated Depreciation
Cr
. 52
(Eliminating sale of equipment by
FMCG Ltd t o RG Ltd)
12 Accumulated Depreciation
Dr
. 20
$
120000/6
To Depreciation
Cr
. 20
$
120000/6
(Elimination of Depreciation in the
books of RG Ltd on the equipment
purchased from FMCG Ltd)
13 Depreciation
Dr
. 13 $ 80000/6
To Accumulated Depreciation
Cr
. 13 $ 80000/6
(Recognising Depreciation on the
equipment sold to RG Ltd by FMCG
Ltd based on the reamining useful life)
14 Deferred Tax Asset
Dr
. 2
30% * ($
$120000/6
-80000/6)
To Tax Expense
Cr
. 2
30% * ($
$120000/6
-80000/6)
(Recognising Deferred Tax Asset on the
unrealised gain on Sale of Equipment)
Non-
controlling
Interest
At Acquisition
Date i.e. 1 July
2017
$0
00
Share Capital of RG Ltd
20
0
Retained earnings
17
0
37
0

CONSOLIDATED FINANCIALS 5
15% of the Shareholders' equity 56
At Beginning of
the reporting
period i.e. 1
July 2018
$0
00
$0
00
Share Capital of RG Ltd
20
0
Add: Retained earnings
24
0
Less: Unrealised Profit 7
Add: Tax on un-realised Profit 2 -5
43
5
15% of the Shareholders' equity 65
At End of the
reporting period
i.e. 30 June
2019
$0
00
$0
00
Share Capital of RG Ltd
20
0
Add: Retained earnings
34
0
Less: Unrealised Profit 6
Add: Tax on un-realised Profit 2 -4
53
6
15% of the Shareholders' equity 80
Less: Dividend 19
61
WN - 1
Computation of Goodwill on
Acquisition of RG Ltd on 1 July 2017
$0
00
Share Capital of RG Ltd
20
0

CONSOLIDATED FINANCIALS 6
Retained earnings
17
0
37
0
85% of the Shareholders' equity
31
5 a
Cost of Investment in RG Ltd
36
0 b
Goodwill at 1 July 2017 45
c
=
b-
a
Impairment during year ending 30 June
2018 22 d
Impairment during year ending 30 June
2019 5 e
Value of Goodwill at 30 June 2019 18
c-
d-
e
Statemet of Financial Position at 30 June 2019
Standalone
Elimi. &
Adjustm.
Cons
olida
ted
Description
FMCG
Ltd
RG
Ltd Dr. Cr.
FM
CG
Ltd
Current assets
Accounts Receivable 60.00 62.00
122.
00
Inventory 90.00 30.00 9.00
111.
00
Non-current assets
Land & Buildings 225.00 325.00
550.
00
Plant-at cost 300.00 356.00 12.00
668.
00
Accumulated
depreciation
-
86.00
-
140.00 20.00
-
65.00
-
311.
00
Goodwill - - 23.00
5.0
0
18.0
0

CONSOLIDATED FINANCIALS 7
Investment in RG Ltd 360.00 - 360.00 -
Total 949.00 633.00
1,15
8.00
Current liabilities
Accounts Payable 56.00 45.00
101.
00
Taxation payable 42.00 24.00 5.00 2.00
63.0
0
NCI 61.00
61.0
0
Non-current liabilities
Loans payable 175.00 118.00
293.
00
Shareholders' equity
Share Capital 350.00 200.00 250.00
300.
00
Retained earnings 326.00 246.00 572.00 340.00
340.
00
Total 949.00 633.00 882.00 712.00
1,15
8.00
170.00
Sales revenue 700.00 575.00 110.00
1,16
5.00
Cost of Goods sold 465.00 235.00 9.00 117.00
592.
00
Gross Profit 235.00 340.00
573.
00
Expenses
Administration expenses 30.00 40.00
70.0
0
Management fee - 26.00 26.00 -
Depreciation 13.00

CONSOLIDATED FINANCIALS 8
25.00 55.00 20.00
73.0
0
Other expenses
102.
00 76.00
178.
00
Impairment 5.00 5.00
Management fee Income
26.
00 26.00 -
Dividend from RG Ltd
75.
00 75.00 -
Gain on Sale of Plant
35.
00 40.00 -5.00
PBT
214.
00
143.
00
242.
00
Tax Expense
65.
00 43.00 5.00
103.
00
PAT 149.00 100.00
139.
00
Retained earnings - 30 June
2018
315.
00 240.00 197.00
358.
00
464.00 340.00
497.
00
Dividends paid 138.00 94.00 75.00
157.
00
326.00 246.00 2,239.00
1,837.0
0
340.
00