Determine the relevant consolidation adjusting entries

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Question - In 20x5, P Ltd paid $300 million to acquire 100% of S Ltd when S Ltd's net assets were represented by share capital of $100 million and retained profit of $100 million. On this date, S Ltd's land which was carried at cost of $100 million was deemed to have a fair value of $150 million. During 20x8, S Ltd sold the land to a third party for $220 million. The accounting policy of P Ltd, S Ltd, and the group was to account for land at cost. Determine the relevant consolidation adjusting entries for 20x8 consolidated financial statements?

1. Dr Share capital $100 million; Dr Retained profit $150 million; Dr Land $50 million; Cr Investment $300 million; and Dr Goodwill $50 million; Cr Land $50 million.

2. Dr Share capital $100 million; Dr Retained profit $100 million; Dr Land $50 million; Dr Goodwill $50 million; Cr Investment $300 million.

3. Dr Share capital $100 million; Dr Retained profit $100 million; Dr Land $50 million; Dr Goodwill $50 million; Cr Investment $300 million; and Dr Profit on sale of land $50 million; Cr Land $50 million.

4. None of the listed choices.

5. Dr Share capital $100 million; Dr Retained profit $150 million; Dr Goodwill $50 million; Cr Investment $300 million.

Reference no: EM132634269

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