Bell Limited ("Bell") owns 75% of the voting shares of Log Limited ("Log") and has control over Log. For the current year ended 31 March 2020, the following intra-group transaction occurred: On 1 November 2019, Log Limited issued 2,500 8% debentures of $100 at nominal value. Bell Limited acquired 30% of these debentures on the issuance date. Interest is payable half-yearly on 30 June and 31 December. Accruals have been recognized in the legal entities' accounts. Bell also owns 25% of Bronze Limited ("Bronze"). Bell has demonstrated significant influence in the financial and operating policy decisions of Bronze but not control or joint control over the company. On 1 April 2019, Bronze sold an item of plant to Bell for $24,000. At the date of transfer, the carrying amount of this plant in Bronze's records was $15,000. The plant has a remaining useful life of 5 years. Bronze's net profit for the year ended 31 March 2020 is $44,000. Required: (a) Prepare all necessary consolidation adjusting entries as at 31 March 2020 in relation to the intragroup transaction. (b) Compute Bell's share of Bronze's profit for the year ended 31 March 2020.
Bell Limited ("Bell") owns 75% of the voting shares of Log Limited ("Log") and has control over Log. For the current year ended 31 March 2020, the following intra-group transaction occurred: On 1 November 2019, Log Limited issued 2,500 8% debentures of $100 at nominal value. Bell Limited acquired 30% of these debentures on the issuance date. Interest is payable half-yearly on 30 June and 31 December. Accruals have been recognized in the legal entities' accounts. Bell also owns 25% of Bronze Limited ("Bronze"). Bell has demonstrated significant influence in the financial and operating policy decisions of Bronze but not control or joint control over the company. On 1 April 2019, Bronze sold an item of plant to Bell for $24,000. At the date of transfer, the carrying amount of this plant in Bronze's records was $15,000. The plant has a remaining useful life of 5 years. Bronze's net profit for the year ended 31 March 2020 is $44,000. Required: (a) Prepare all necessary consolidation adjusting entries as at 31 March 2020 in relation to the intragroup transaction. (b) Compute Bell's share of Bronze's profit for the year ended 31 March 2020.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 23E
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Transcribed Image Text:Bell Limited ("Bell") owns 75% of the voting shares of Log Limited ("Log") and has control
over Log.
For the current year ended 31 March 2020, the following intra-group transaction occurred:
-
On 1 November 2019, Log Limited issued 2,500 8% debentures of $100 at nominal value.
Bell Limited acquired 30% of these debentures on the issuance date. Interest is payable
half-yearly on 30 June and 31 December. Accruals have been recognized in the legal
entities' accounts.
Bell also owns 25% of Bronze Limited ("Bronze"). Bell has demonstrated significant influence
in the financial and operating policy decisions of Bronze but not control or joint control over the
company. On 1 April 2019, Bronze sold an item of plant to Bell for $24,000. At the date of
transfer, the carrying amount of this plant in Bronze's records was $15,000. The plant has a
remaining useful life of 5 years. Bronze's net profit for the year ended 31 March 2020 is $44,000.
Required:
(a) Prepare all necessary consolidation adjusting entries as at 31 March 2020 in relation to the
intragroup transaction.
(b) Compute Bell's share of Bronze's profit for the year ended 31 March 2020.
Ignore taxation.
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