Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2004. The fair value of the net assets of Marx Ltd at purchase was represented by:

Groucho Ltd paid cash consideration of $1,850,000 for Marx Ltd. During the period ended 30 June 2005, Marx Ltd paid management fees of $200,000 to Groucho Ltd and Marx had an operating profit of $530,000. Marx Ltd paid a dividend of $100,000 during the period. Groucho purchased inventory from Marx during the period for $80,000. The inventory cost Marx Ltd $56,000 and at the end of the period Groucho had 50 per cent of that inventory still on hand. Goodwill has been determined to have been impaired by $6,200 during the period. Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries. Ignore tax implications.
For the period ended 30 June 2005, what consolidation journal entries are required and what is the minority interest?
E) None of the given answers.

Question

Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2004. The fair value of the net assets of Marx Ltd at purchase was represented by:

Groucho Ltd paid cash consideration of $1,850,000 for Marx Ltd. During the period ended 30 June 2005, Marx Ltd paid management fees of $200,000 to Groucho Ltd and Marx had an operating profit of $530,000. Marx Ltd paid a dividend of $100,000 during the period. Groucho purchased inventory from Marx during the period for $80,000. The inventory cost Marx Ltd $56,000 and at the end of the period Groucho had 50 per cent of that inventory still on hand. Goodwill has been determined to have been impaired by $6,200 during the period. Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries. Ignore tax implications.
For the period ended 30 June 2005, what consolidation journal entries are required and what is the minority interest?
E) None of the given answers.

Quizplus · Accepted Answer

The Answer of Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2004. The fair value of the net assets of Marx Ltd at purchase was represented by:

Groucho Ltd paid cash consideration of $1,850,000 for Marx Ltd. During the period ended 30 June 2005, Marx Ltd paid management fees of $200,000 to Groucho Ltd and Marx had an operating profit of $530,000. Marx Ltd paid a dividend of $100,000 during the period. Groucho purchased inventory from Marx during the period for $80,000. The inventory cost Marx Ltd $56,000 and at the end of the period Groucho had 50 per cent of that inventory still on hand. Goodwill has been determined to have been impaired by $6,200 during the period. Companies in the group use perpetual inventory systems and accrue dividends when they are declared by subsidiaries. Ignore tax implications.
For the period ended 30 June 2005, what consolidation journal entries are required and what is the minority interest?
E) None of the given answers.

Groucho Ltd Purchased 60 Per Cent of the Issued Capital