Question: adjustment/elimination
journal entries for consolidation at 30 June 2012.

1.On
1 July 2009, Julia Ltd acquired 60% of the issued capital of Gillard Ltd for
$700,000 cash. The balance sheet of Gillard Ltd at the acquisition date showed:
Share capital $400,000; Retained earnings $600,000. All assets and liabilities
were recorded at fair value, except for an item of plant that was undervalued
by $50,000. At that time it had a remaining life of 5 years and accumulated
depreciation of $36,000.

2.On
1 January 2011 Gillard Ltd sold an item of plant to Julia Ltd for $60,000 when
its carrying value in Gillard’s books was $50,000 (original cost $80,000 and
original estimated life of 8 years). Julia Ltd still had the plant on hand at
30 June 2012.

For the year ended 30 June 2012:

1.
Julia Ltd made sales of inventory to Gillard Ltd of
$130,000, while Gillard Ltd sold $104,000 of inventory to Julia Ltd.

2.
The opening inventory in Julia Ltd
included stock of $84,000 acquired from Gillard Ltd, which had originally cost
Gillard Ltd $70,000.

3.
Closing inventories included the
following intragroup purchases: Julia Ltd $67,200 (that had originally cost
Gillard Ltd $56,000) and Gillard Ltd $24,000 (that had originally cost Julia
Ltd $19,200).

4.
On 1 July 2011 Julia Ltd sold an item
of plant to Gillard Ltd for $100,000 when its carrying value in Julia’s books
was $170,000 (original cost $212,500 and original estimated life of 10 years).

5.The
management of Julia Ltd believes that the goodwill acquired from Gillard Ltd
was impaired by $6,000 in the current year, following previous impairments
totaling $20,000.

6.
Gillard Ltd paid management fees and
dividends to Julia Ltd.

7.The
Julia Ltd has the following accounting policies which have been in place for
many years:(i) Plant is depreciated straight-line over
its estimated life, with no residual value; (ii) Non-controlling interest is
measured at the proportionate share of the identifiable net assets of the
subsidiary; and (iii) Revaluation
adjustments on acquisition are to be made on consolidation only, not in the
books of the subsidiary.

8.The
company tax rate is currently 30% and it has been this rate for many years.