Reference no: EM133025806

Question - On 1 July 2019, Parent Ltd acquired 70% of the ordinary voting shares of Child Ltd which in turn acquired 80% of the ordinary voting shares of Grandchild Ltd.

The fair value of the net assets of Grandchild Ltd at the date of acquisition are represented by total shareholders' equity as follows:

$

Share capital 500,000

Retained profits 400,000

Total shareholders' equity 900,000

The net profits of and dividends paid by Grandchild Ltd for the two years ending 30 June 2020 and 30 June 2021 are as follows:

$

After tax Profit for 2020 140,000

Dividends paid for 2020 (40,000)

After tax Profit for 2021 220,000

There are no are other changes in the equity for Grandchild Ltd. Grandchild Ltd made a profit after tax of $20,000 from inventory sales to Parent Ltd during the 2021 year and Parent Ltd has that inventory on hand with at year end.

REQUIRED -

A) Prepare a table that shows the ownership interest percentages in the two subsidiaries distinguishing between direct and indirect interests.

B) Based on the information provided, prepare the consolidation journal entries necessary to allocate the non-controlling interest in Grandchild Ltd as at 30 June 2021.