Groucho Ltd Purchased 60 Per Cent of the Issued Capital

Groucho Ltd purchased 60 per cent of the issued capital and in the process gained control over Marx Ltd on 1 July 2014.The fair value of the net assets of Marx Ltd at purchase was represented by: $$\begin{array} { | l | r | } \text { Share capital } & \$ 2140000 \\\hline \text { Retained earnings } & 840000 \\\hline & \$ 2980000 \\\hline\end{array}$$ Groucho Ltd paid cash consideration of $1 850 000 for Marx Ltd.During the period ended 30 June 2015,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 $6200 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 2015,what consolidation journal entries are required and what is the non-controlling interest?

A) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|l|}\hline \mathrm{Dr} & \text { Share capital } & 1284000 & \\\hline \mathrm{Dr} & \text { Retained earnings } & 504000 & \\\hline \mathrm{Dr} & \text { Goodwill } & 62000 & \\\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \\\hline\\\hline \mathrm{Dr} & \text { Impairment loss } & 6200 & \\\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 6200 \\\hline & & & \\\hline \mathrm{Dr} & \text { Management fee revenue } & 120000 & \\\hline \mathrm{Cr} & \text { Management fee expense } & & 120000\\\hline\\\hline \mathrm{Dr} & \text { Dividend revenue } & 60000 & \\\hline \mathrm{Cr} & \text { Dividend paid } & & 60000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Sales revenue } & 48000 & \\\hline \mathrm{Cr} & \text { Cost of goods sold } & & 48000 \\\hline\\\hline \mathrm{Dr} & \text { Cost of goods sold } & 7200 & \\\hline \mathrm{Cr} & \text { Inventory } & & 7200 \\\hline\end{array}$

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|l|}\hline \text { Operating profit } & 292000& \quad\quad\quad\\\hline \text { Opening retained earnings } & 336000 \\\hline \text { Dividends } & (40000) \\\hline \text { Share capital } & 856000 \\\hline \text { Total } & 1444000 \\\hline\end{array}$
B) $\text { Consolidation journal entries: }$
$\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Share capital } & 2140000 & \\\hline \mathrm{Dr} & \text { Retained earnings } & 840000 & \\\hline \mathrm{Cr} & \text { Non-controlling interest } & & 1130000 \\\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Management fee revenue } &120000 & \\\hline \mathrm{Cr} & \text { Management fee expense } & &120000 \\\hline\\\hline \mathrm{Dr} & \text { Dividend revenue } & 60000 & \\\hline \mathrm{Cr} & \text { Dividend paid } & & 60000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Sales revenue } & 48000 & \\\hline \mathrm{Cr} & \text { Cost of goods sold } & & 48000 \\\hline\\\hline \mathrm{Dr} & \text { Cost of goods sold } & 7200 & \\\hline \mathrm{Cr} & \text { Inventory } & & 7200 \\\hline\end{array}$

$\text { Non-controlling interest: }$
$\begin{array}{|l|r|r|}\hline\text { Operating profit } & 212000&\quad\quad\quad \\\hline \text { Opening retained earnings } & 336000 \\\hline \text { Dividends } & (4000) \\\hline \text { Total } & 1475200\\\hline\end{array}$

C) $\begin{array}{l}\begin{array} { | c | l | r | r | } \hline \text { Consolidation journal entries: } & & \\\hline \mathrm { Dr } & \text { Share capital } & 1284000 & \\\hline \mathrm { Dr } & \text { Retained earnings } & 504000 & \\\hline \mathrm { Cr } & \text { Investment in Marx Ltd } & & 1788000 \\\hline & & & \\\hline \mathrm { Dr } & \text { Management fee revenue } & 120000 & \\\hline \mathrm { Cr } & \text { Management fee expense } & & 120000 \\\hline \mathrm { Dr } & \text { Dividend payable } & & \\\hline \mathrm { Cr } & \text { Dividend receivable } & 60000 & \\\hline & & & 60000 \\\hline \mathrm { Dr } & \text { Cost of goods sold } & & \\\hline \mathrm { Cr } & \text { Inventory } & 12000 & \\\hline & & & 12000 \\\hline\end{array}\\\end{array}$

$\begin{array}{l}\text { Non-controlling interest: }\\\begin{array} { | l | r | r | } \hline \text { Operating profit } & 207200 &\quad\quad\quad\quad \\\hline \text { Opening retained earnings } & 340800 & \\\hline \text { Dividends } & 40000 & \\\hline \text { Share capital } & 856000 & \\\hline \text { Total } & 1444000 & \\\hline\end{array} \end{array}$

D) $\begin{array}{|l|l|r|r|}\hline \mathrm{Dr} & \text { Share capital } & 1284000 & \\\hline \mathrm{Dr} & \text { Retained earnings } & 504000 & \\\hline \mathrm{Dr} & \text { Goodwill } & 62000 & \\\hline \mathrm{Cr} & \text { Investment in Marx Ltd } & & 1850000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Impairment loss } & 6200& \\\hline \mathrm{Cr} & \text { Accumulated impairment loss } & & 6200\\\hline & & & \\\hline \mathrm{Dr} & \text { Management fee revenue } & & \\\hline \mathrm{Cr} & \text { Management fee expense } & & \\\hline & & & \\\hline \mathrm{Dr} & \text { Dividend revenue } &60000 & \\\hline \mathrm{Cr} & \text { Dividend paid } & &60000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Sales revenue } &80000 & \\\hline \mathrm{Cr} & \text { Cost of goods sold } & &80000 \\\hline & & & \\\hline \mathrm{Dr} & \text { Cost of goods sold } &12000 & \\\hline \mathrm{Cr} & \text { Inventory } & &12000 \\\hline\end{array}$

$\begin{array}{l}\text { Non-controlling interest: }\\\begin{array}{|l|r|r|}\hline \text { Operating profit } & 207200&\quad\quad\quad \\\hline \text { Opening retained earnings } & 336000 \\\hline \text { Dividends } & (40000) \\\hline \text { Share capital } & 856000 \\\hline \text { Total } & 1359200\\\hline\end{array}\end{array}$