Alpha Ltd owns 100% of the shares of Belmont Ltd, acquired on 1 July 2010 for $3.5 millionwhen the shareholders funds of Belmont Ltd were:Share Capital 1,750,000Retained Earnings 1,400,0003,150,000All assets of Belmont Ltd are fairly stated at acquisition date.The directors believe that there has been an impairment loss on the goodwill of $35,000 forthe year ended 30 June 2011.During the 2011 financial year, Belmont Ltd sells inventory to Alpha Ltd at a sales price of$700,000. The inventory cost Belmont Ltd $420,000 to produce. At 30 June 2011, half of theinventory is still on hand with Alpha Ltd.The tax rate is 30%.The accounts of Alpha Ltd and Belmont Ltd as 30 June 2011 are as follows;Alpha BelmontEliminations andadjustments ConsolidatedCompany Company Dr Cr Statement$000 $000 $000 $000 $000Income statementSales revenue 4 200 1 400Less: cost of goods sold (1 750) (490)Less: other expenses (210) (105)Other revenue 245 87.5Profit 2 485 892.5Tax expense 700 350Profit after tax 1 785 542.5Retained earnings1 July 2010 3 500 1 4005 285 1 942.5Dividends paid 700 140 Retained earnings30 June 2011 4 585 1 802.5Balance sheetShareholders equityRetained earnings30 June 2011 4 585 1 802.5Share capital 14 000 1 750Current liabilitiesAccounts payable 350 297.5Non-current liabilitiesLoans 2 100 875 21 035 4 725Current assetsCash 875 87.5Accounts receivable 525 612.5Inventory 2 100 1 050Non-current assetsLand 5 040 1 400Plant 8 645 1 400Investment in Belmont Ltd 3 500 Deferred tax asset 350 175Goodwill 21 035 4 725RequiredPrepare the consolidated journals for Alpha Ltd and its controlled entity for 2011Use the above worksheet and complete the consolidated statement.a. Determine goodwill or gain on acquisitionb. Eliminate inter-company sales transaction.c. Eliminate unrealized profit in closing inventoryd. Adjust the tax expense for unrealized profit or lossese. Eliminate dividend paid by Belmont to Alphaf. Impair goodwill
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