a) What is the basis for consolidation of a group of companies? What financial statements are required for a corporate group? What, if any, transactions within a group should be excluded from group financial statements?
b) Information: On January 1, 2015 Major Inc acquired 70 per cent of the share capital of Minor Inc, a market competitor, for US $500,000. At the date of acquisition, the net assets of Minor Inc had a fair value that exceeded book value by $100,000. The individual balance sheets of the two companies are set out below.
Major Minor
USD USD
Assets
Non-current assets $1,000,000 $200,000
Investment in S 500,000
Net current assets 20,000 10,000
Net assets 1,520,000 210,000
Ordinary share capital $1 1,000,000 150,000
Retained earnings 520,000 60,000
1,520,000 210,000