Dolly Ltd acquired a 60 per cent interest in Vardon Ltd on 1 July 2002 for a cash consideration of $1,300,000.At that date fair value of the net assets of Vardon Ltd were represented by: On 1 July 2004 Dolly Ltd purchased the final 40 per cent of the issued capital of Vardon Ltd for cash consideration of $950,000.At this date the fair value of the net assets of Vardon Ltd were represented by:
Impairment of goodwill was assessed at $3,000; of which $2,000 related to the year ended 30 June 2005.There were no intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary and amortise goodwill for the period ended 30 June 2006?
E) None of the given answers.

Question

Dolly Ltd acquired a 60 per cent interest in Vardon Ltd on 1 July 2002 for a cash consideration of $1,300,000.At that date fair value of the net assets of Vardon Ltd were represented by:  On 1 July 2004 Dolly Ltd purchased the final 40 per cent of the issued capital of Vardon Ltd for cash consideration of $950,000.At this date the fair value of the net assets of Vardon Ltd were represented by:
 Impairment of goodwill was assessed at $3,000; of which $2,000 related to the year ended 30 June 2005.There were no intragroup transactions.What are the consolidation entries to eliminate the investment in the subsidiary and amortise goodwill for the period ended 30 June 2006?
E) None of the given answers.

Quizplus · Accepted Answer

The consolidation entries required to eliminate the investment in the subsidiary and amortise goodwill for the period ended 30 June 2006 are as follows:

1. Elimination of investment in subsidiary:
Dr Investment in Vardon Ltd $1,950,000
Cr Vardon Ltd share capital $1,300,000
Cr Vardon Ltd share premium $400,000
Cr Retained earnings (01/07/04 – 30/06/06) $250,000

2. Amortisation of goodwill:
Dr Amortisation expense – Goodwill $500,000
Cr Goodwill $500,000

Option B correctly represents these entries.

Dolly Ltd Acquired a 60 Per Cent Interest in Vardon