ex25.2 NCI

ex25.2 NCI - 1 TUTORIAL 9 SOLUTIONS Chapter 25:...

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Unformatted text preview: 1 TUTORIAL 9 SOLUTIONS Chapter 25: Consolidation: Non-controlling interest DISCUSSION QUESTIONS 1. If a step approach is used in the calculation of the NCI share of equity, what are the steps involved? Step 1: share of subsidiary equity at acquisition date; Step 2: share of change in subsidiary equity from acquisition date to beginning of the current period, and Step 3: share of change in equity in the current period. Step 1 Step 2 Date of acquisition of subsidiary Beginning of the current reporting period 1. NCI share of the pre- 2. acquisition equity: share capital retained profits other reserves Step 3 End of the current reporting period (the reporting date) NCI share of the post- 3. NCI share in current acquisition component period change in of opening equity equity: balances: retained profits Net profit other reserves Dividends distributed Other comprehensive income 2 Exercise 25.2 Consolidation worksheet entries including NCI WUWEI LTD – ANSHAN LTD 90% Wuwei Ltd Anshan Ltd Wuwei Ltd 90% NCI 10% At 1 July 2009: Net fair value of identifiable assets and liabilities of Anshan Ltd = Net fair value acquired: Consideration transferred Goodwill of the parent = = = = = $200 000 + $80 000 (equity) + $10 000 (1 – 30%) (land) + $2 000 (1 – 30%) (inventory) + $20 000 (1 – 30%) (machinery) $302 400 90% x $302 400 $272 160 $290 160 $18 000 PART 1. Worksheet entries at 1 July 2009 1. Business combination valuation entries Land Machinery Deferred tax liability Business combination valuation reserve Dr Cr Cr 20 000 Inventory Deferred Tax Liability Business combination valuation reserve 2. Dr Cr Cr 10 000 Deferred tax liability Business combination valuation reserve Dr Cr Cr 2 000 Dr Dr Dr Dr Cr 180 000 72 000 20 160 18 000 Dr Dr Dr Cr 20 000 8 000 2 240 3 000 7 000 6 000 14 000 600 1 400 Pre-acquisition entries Share capital Retained earnings (1/7/09) Business combination valuation reserve Goodwill Shares in Anshan Ltd 290 160 3. NCI share of equity at 1 July 2009 Share capital Retained earnings (1/7/09) Business combination valuation reserve NCI 30 240 3 Exercise 25.2 (Cont’d) PART 2. Worksheet entries at 30 June 2010 1. Business combination valuation entries Land Dr Cr Cr 10 000 Deferred tax liability Business combination valuation reserve Machinery Deferred tax liability Business combination valuation reserve Dr Cr Cr 20 000 Depreciation expense Accumulated depreciation (1/10 x $20 000) Dr Cr 2 000 Deferred tax liability Income tax expense Dr Cr 600 Cost of sales Income tax expense Transfer from business combination valuation reserve Dr Cr 2 000 3 000 7 000 6 000 14 000 2 000 600 600 Cr 1 400 2. Pre-acquisition entries Retained earnings (1/7/09) Share capital Business combination valuation reserve Goodwill Shares in Anshan Ltd Dr Dr Dr Dr Cr 72 000 180 000 20 160 18 000 Transfer from business combination valuation reserve Business combination valuation reserve Dr Cr 1 260 Dr Dr Dr Cr 20 000 2 240 8 000 290 160 1 260 3. NCI share of equity at 1 July 2009 Share capital Business combination valuation reserve Retained earnings (1/7/09) NCI 30 240 4 Exercise 25.2 (Cont’d) 4. NCI share of equity: 1/7/09 - 30/6/10 cost of sales up, profit down (causing by difference btw cost of sales) for S and group NCI share of profit Dr 1 720 NCI Cr 1 720 (10% ($20 000 – ($2 000 - $600) – ($2 000 – $600))) Transfer from business combination valuation reserve Business combination valuation reserve (10% x $1 400) Dr Cr 140 PART 3. Full goodwill method (CALCULATE FULL GOODWILL ONLY) NCI has fair value of $31 800 At 1 July 2009: Net fair value of identifiable assets and liabilities of Anshan Ltd = (a) Consideration transferred (b) Non-controlling interest Aggregate of (a) and (b) Goodwill Net fair value acquired: Goodwill – parent Goodwill – NCI = = = = = = $200 000 + $80 000 (equity) + $10 000 (1 – 30%) (land) + $2 000 (1 – 30%) (inventory) + $20 000 (1 – 30%) (machinery) $302 400 $290 160 $31 800 $321 960 $321 960 - $302 400 $19 560 = = = = 90% x $302 400 $272 160 $18 000 $1 560 140 ...
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