Homework Answers
(a) Books of Father Ltd.
Following Entry will be done in the Books of Father Ltd for Purchase of 70% shares of Son Ltd:
Investment in Son Ltd Dr. $870,000
Cash Cr. $870,000
(b) As per IFRS 3, Goodwill is calculated on Proportionate Share of Net Asset Basis method:
Total Consideration $870,000
Less: 70% of Net Worth
Net Worth :
Share Capital $300,000
+ Retained Earning $800,000
+ MV of Equipment $230,000
- BV of Equipment $200,000
Net Worth $1,130,000
70% of Net Worth $791,000
$79,000
Hence Goodwill is $79,000
(c) For consolidation purposes,
Non Controlling Interest = 30% of Net Worth = 30% of $1,130,000 = $339,000
Hence the below Consolidation Elimination Entry will be recorded in Consolidated Statements:
Net Assets Dr. $1,130,000
Goodwill Dr. $79,000
Non Controlling Interest Cr. $339,000
Investment in Son Ltd. Cr. $870,000
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