1. Rutland Ltd acquired 80% of the shares of Moreland Ltd on 1 July 2015 for $109 720. At this date the equity of Moreland Ltd consisted of:
Share capital (100 000 shares) $ 80 000
General reserve 2 400
Retained earnings 29 600
All the identifiable assets and liabilities of Moreland Ltd were recorded at amounts equal to their fair values except for:
Carrying amount Fair value
Plant (cost $65 000) $52 000 $56 000
Land 40 000 45 000
The plant was expected to have a further useful life of 10 years. Rutland Ltd uses the partial goodwill method. At 1 July 2015, Moreland Ltd had unrecorded brands that had a fair value of $18 000. These had an indefinite life. The tax rate is assumed to be 30%.
• Moreland Ltd had inventory on hand at 30 June 2017 that included inventory at cost of $8000 that had been sold to it by Rutland Ltd. This inventory had cost Rutland Ltd $6000. It was all sold by Moreland Ltd by 30 June 2018.
• During the 2017–18 year, Moreland Ltd sold inventory to Rutland Ltd for $48 000. At 30 June 2018, Rutland Ltd still had half of this inventory on hand. This inventory had been sold to it by Moreland Ltd at a profit of $8000.
• On 1 January 2017, Moreland Ltd sold plant to Rutland Ltd for $16 000. This had a carrying amount in Moreland Ltd at time of sale of $12 000. Plant of this class is depreciated at 20% p.a.
• Management and consultation fees derived by Rutland Ltd are all from Moreland Ltd and represent charges for administration $1760 and technical services for the manufacturing section $2240.
• All debentures issued by Moreland Ltd $80 000 are held by Rutland Ltd. The interest is 5% per annum.
• Moreland Ltd has paid $8000 interim dividend and declared a $4000 dividend from the current year’s profits.
• Financial Statements provided by Moreland Ltd at 30 June 2018 exhibit the equity of Moreland Ltd includes: Share capital $80 000, General Reserve $8000, Other Component of Equity $8000, Opening Retained Earnings (opening RE) $36 000, Operating Profit after Tax (OPAT) $14 400.
1. Show the acquisition analysis.
2. Prepare consolidation journal entries to recognize fair value adjustments and to eliminate pre-acquisition and intra-group transactions for the year ended 30 June 2018.
3. Prepare one consolidation journal entry to recognize the non-controlling interest (NCI) in Moreland Ltd’s equity for the year ended 30 June 2018. Show all your NCI calculations.