Question

Big Company owns all of the issued capital of Small Company. Big Company acquires its 100 per cent interest in Small Company on 1 July 2018 for a cost of $2000. All assets are fairly stated at acquisition date. The share capital and reserves of Small Company on the date of acquisition are:

	$
Share capital	1 250
Retained earnings	750
	2 000

The reconciliation of retained earnings and statement of financial positions of Big Company and Small Company, as at 30 June 2019, are as follows:

The reconciliation of retained earnings and statement of financial positions of Big Company and Small Company, as at 30 June 2019, are as follows:

	Big Company ($)	Small Company ($)
Reconciliation of opening and closing retained earnings
Profit before tax	500	250
Tax	125	100
Profit after tax	375	150
Opening retained earnings	1 000	750
	1 375	900
less Dividends declared	175	125
Closing retained earnings	1 200	775
Statement of financial position
Shareholders’ funds
Retained earnings	1 200	775
Share capital	1 250	1 250
Liabilities
Accounts payable	2 500	250
Dividends payable	175	125
	5125	2 400
Assets
Cash	250	175
Accounts receivable	125	325
Dividends receivable	250	–
Inventory	375	400
Plant and equipment	2 125	1 500
Investment in Small Company	2 000	–
	5 125	2 400

REQUIRED

Provide the consolidated statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity for Big Company and its controlled entity for the year ending 30 June 2019

Answer 1

Fubject Date .of. Profut. Alos. .other...comprebensive.înome (4). HE0625 (225) 50005 400 Conselidated.. statement. oofet..befare. tak CTax) Profet. aftes tax Other..compochensine. inome. Comprehensive. Anuome.

f.change.in.equity Statement.. . Common shck @ par Total Retained eaoning Balance.on Zuly 2018. Neteamings OC9. Dimudends. Balance.au. on June2019 2250 1250. (175) 2475 C1A5) 1225 1250

Statement. af funancia.poiion. Shareholden's.. fund. Relaîned eamings. Shaze..capital. () Notes. 1225 0 1250 Liabiluhies. Aciount. Payable. Dinidend. payable. 2750 175 5400 (1) Total Auet 425 450 125 775 3625 Cash .Account. ricieuable. Dinidends..recuauable. Anventory Plant & equipment. (2) To tal 5400 Diuidend.. payable.uillremain. Samu. as (4) st. is. payable. by.holding.company Diui.dend.. recienable..cuill be eliminateel bandaction. 125 To. Diudend..paauble..Ale..125 (2). it.. is intescompany. Diuidend. peauable. Ac Dr decdeuabk

is..caeduted to. Dîuidend.re.cuenable. getained.. eaming.account hence same.. hould. will. Hencelrofet. of 32. ke..debitted. se. the. profit. seduced..by.125 before..tanis. todal subidiaz. dese be.. De125 heldeng