Question:
The balance sheet of Hero Ltd (H Ltd) and Silver Ltd (S Ltd) as at 31 December 2009 are as shown below:
H Ltd S Ltd
$000 $000
Tangible fixed assets
Land and building 4,000 2,000
Plant and machinery 5,500 800
Investments 9,500 2,800
Shares in S Ltd 2,100
Other investments 500
2,600
Current assets
Inventory 400 200
Trade receivables 200 100
Current account with S Ltd 1,300
Cash 2,400 1,500
4,300 1,800
Current liabilities
Trade payables (1,200) (400)
Current account with H Ltd 0 (800)
Dividends payable (1,000) (400)
2,100 200
Total net assets 14,200 3,000
Share capital 10,000 2,000
Retained earnings 4,200 1,000
Total equity 4,200 3,000
Hero Ltd acquired 60% of the share capital of Silver Ltd on 1 January 2007 when the retained earnings of S Ltd were $500,000.
On 31 December 2009, S Ltd sent a cheque to H Ltd for $200,000 and also goods in transit of $300,000. Both cash and goods were not received by H Ltd until 1 January 2010.
H Ltd has not included any entries in its accounts relating to the dividend receivable from S Ltd.
30% of the goodwill is to be written off as an impairment loss in 2009.
Required:
1 Prepare the consolidation journal entries for H Ltd & S Ltd.
2 Prepare a consolidated balance sheet for H Ltd as at 31 December 2009 showing the adjustment by using a worksheet.