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Prepare the consolidation worksheet entries

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Reference no: EM132745329

Question - Paper Ltd acquired 100% of the issued shares (cum dividend) of Pencil Ltd on 1 January 2019 for consideration of $470,000. Paper Ltd has recorded goodwill on consolidation of $45,000.

The following transactions occurred for the year ended 30 June 2021:

(a) At 30 June 2020, assets of Pencil Ltd included inventory sold to it by Paper Ltd for a before-tax profit of $500. These items remain on hand during the 2020-21 year.

(b) During the 2020-21 year, Pencil Ltd had sold inventory to Paper Ltd for $60,000. Pencil Ltd has recorded profit at 25% mark up on selling price. At 30 June 2021, Paper Ltd still had a quarter of this inventory on hand.

(c) On 2 January 2021, Pencil Ltd sold a vehicle to Paper Ltd for $45,000. The vehicle was purchased by Pencil Ltd on 1 July 2020 at $50,000. Paper Ltd regards the vehicle as an inventory, and sold it to its customer for $65,000 on 1 June 2021.

(d) Pencil Ltd has revalued its land to the fair value on 1 January 2021 and charged the amount of $14,000 to the Asset Revaluation Surplus.

(e) Paper Ltd provided Pencil Ltd with 8% $100,000 loan payable on 1 January 2021. The principal repayment is scheduled on the basis of eight (8) equal payments commencing on 1 July 2021. Interest on the loan is to be paid together with the principal repayment.

Required - Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of Pencil Ltd at 30 June 2021 in accordance to IFRS 3/ AASB 3 and IFRS 10/ AASB 10. Show all workings. Narrations for the journal entries are required.

Reference no: EM132745329

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