The following information has been extracted from the financial records of Platinum Ltd and its subsidiary Serum Ltd at 30 June 2017.

Income statement

Platinum Ltd ($)

Serum Ltd ($)

Sales revenue

198,000

112,000

Cost of goods sold

-149,000

-102,000

Gross profit

49,000

10,000

Dividend revenue

8,000

25,000

Depreciation expense

-12,000

-11,000

Other expenses

-8,000

-4,000

Profit before tax

37,000

20,000

Tax expense

-11,100

-6,000

Profit for the year

25,900

14,000

Retained earnings – 30 June 2016

110,000

46,000

Interim dividend paid

0

-10,000

Retained earnings – 30 June 2017

135,900

50,000

Statement of financial position

Platinum Ltd ($)

Serum Ltd ($)

Shareholders’ equity

Retained earnings

135,900

50,000

Share capital

40,000

40,000

Other reserves

60,000

Current liabilities

Accounts payable

50,000

79,000

Deferred tax liability

30,000

50,000

Total liabilities and equity

315,900

219,000

Current assets

cash

120,900

84,000

inventory

100,000

100,000

Non-current assets

Investment in Serum Ltd

90,000

Deferred tax asset

5,000

35,000

Total assets

315,900

219,000

Additional information

• Platinum Ltd acquired its 80% interest in Serum Ltd on 1 July 2015 for $90,000. At that date the capital and reserves of Serum Ltd were: Share Capital of $40,000 and Retained Earnings of $20,000.

• At the date of acquisition, all assets of Serum Ltd were at fair value except for machinery. The fair value of machinery was greater than the carrying value by $4,000. The cost of machinery was $10,000 and accumulated depreciation was $5,000, with a remaining useful life of 4 years.

• The opening inventory of Platinum Ltd as at 1 July 2016 included one-half of inventory acquired from Serum Ltd for $60,000, and that had cost $40,000 to produce. This inventory was sold outside the group during the current period.

• The management of Platinum Ltd believes that goodwill acquired has been impaired. At end of 30 June 2016, the goodwill was impaired by $2,000, and at end of 30 June 2017, it has been impaired by a further $3,000.

• Tax rate is 30%. Each entity pays its own tax.

• The management of Platinum Ltd values any non-controlling interest in Serum Ltd at fair value.

Required: Show detailed workings for each answer in a format that includes a description of each item.

(a) Consolidation journal entries for the elimination of Platinum Ltd’s investment in Serum Ltd for the year ending 30 June 2017.

(b) Consolidation journal entries for the fair value adjustment of the machinery in Serum Ltd and the resulted tax effect to be done at the date of acquisition to prepare group accounts for the ending 30 June 2017.

(c) Consolidation journal entries relating to pre-tax depreciation entry resulting because of fair value adjustment of the machinery to prepare group accounts for the ending 30 June 2017.

(d) Consolidation journal entries relating to tax effect result from the depreciation entry resulting because of fair value adjustment of the machinery to prepare group accounts for the ending 30 June 2017.

(e) Consolidation journal entries relating intra-group inventory transaction and its tax effect to prepare group accounts for the ending 30 June 2017.

(f) Consolidation journal entries relating to amortisation of goodwill.

(g) Consolidation journal entries relating to intra-group dividends.

(h) Itemise and show the non-controlling interests in Platinum Ltd on acquisition date (i.e. 1 July 2015) assuming that the management of Platinum Ltd values any non-controlling interest in Serum Ltd at fair value.

(i) Itemise and show the non-controlling interest in movements in share capital and reserves between the date of Platinum Ltd.’s acquisition of Serum Ltd (1 July 2009) and the beginning of the current reporting period (1 July 2016).

(j) Itemise and show the non-controlling interests of the Platinum Ltd Group for the year ending 30 June 2017.

(k) State the total non-controlling interest of the Platinum Ltd Group for the year ending 30 June 2017.

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