7) On 1 July 2008 V Ltd. acquires 70% of the equity capital of C Ltd....
7) On 1 July 2008 V Ltd. acquires 70% of the equity capital of C Ltd. at a cost of $1 million. All of the assets of C Ltd. were fairly stated, and the total shareholders’ funds of C Ltd. were $1.9 million, as follows: Share capital $1 200 000 Retained earnings $700 000 $1 900 000 As at the 30th June 2009 V Ltd. holds inventory purchased from C Ltd. during the year on which there is unrealized profit of $2 400. Given a tax rate of 30 per cent, what is the entry on the 30th June 2009 related to adjusting minority interests for the overstatement of inventory at the end of that year? A) Dr $504 B) Dr $720 C) Dr $1 680 D) No adjustment required
Homework Answers
Here the subsidiary co C ltd has sold good to V ltd i.e. this is the case of upstream sales. Here the profit on this transaction has been included in subsidiary books. Hence, the profit on this transaction has to be excluded from both consolidated profit and minority interest. The amount of unrealised profit after tax on minority interest share = $2,400*30%*(1-0.30)= 504.
So here the correct answer is A) $504
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7) On 1 July 2008 V Ltd. acquires 70% of the equity capital of C
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