Problem
Jimmy ltd acquired its 75% interest in jo ltd on 1 july 2021 for $750,000 when all assets of Jo ltd were fairly valued except for an equipment that had a fair value $6000 greater than its carrying amount, the cost of the equipment was $30,000 and it had accumulated depreciation $12,000 the equipment had orginal estimated useful life of 5years. Capitals of Jo ltd were:
Share capital $ 55,000
Retained earnings $ 300,000
The management of Jimmy ltd measures any non- controlling interest( NCI) in Jo ltd at fair value. Assume that there are no intra group transactions or deferred tax consequences from 1 July 2021 to 30 June 2022. Tax rate Is 30% reporting date is 30 June. Jimmy ltd has investment in other entities.
• make an acquisition analysis at 1 July 2021, to determine goodwill or gain on bargain purchase at acquisition
• make all consolidation journals at 30 June 2022
• Jimmy ltd owns 50% of Sandy ltd's ordinary shared, the remaining 50% of Sandy LTD's ordinary shares are owned by Mel ltd. Jimmy ltd and Mel ltd have four seats on the board, with no party having the casting vote. However Jimmy Ltd appoints the managing director. Profits are split 50-50 after the provision of the managing director's salary. Jimmy ltd is the only holder of 1000 options in Sandy ltd which are exercisable at any time at a 5.55% discount to the fair value of the ordinary shares at the exercise date.
Should Jimmy ltd consolidate sandy ltd? Be sure to Justify your decision with an explanation of why and why not?