Giant Ltd acquired 80 percent share capital of Expert Ltd. On 1 July 2018 for a cost of $1,600,000. As at the date of acquisition, all assets and liabilities of Expert Ltd were fairly valued except a land that has a carrying value $150,000 less than the fair value. The recorded balance of equity of Expert Ltd as at 1 July 2018 were as: Share capital $800,000 Retained earnings $200,000 General Reserve $400,000 Total $1,400,000 Additional information:  The management of Giant Ltd values non-controlling interest at the proportionate share of Expert Ltd identifiable net assets.  Expert Ltd has a profit after tax of $200,000 for the year ended 30 June 2019.  During the financial year to 30 June 2019, Expert Ltd sold inventory to Giant Ltd for a price of $120,000. The inventory costs Expert Ltd $60,000 to produce. 25 percent of the inventory are still on the hand of Giant Ltd as at 30 June 2019.  During the year Expert Ltd paid $60,000 in consultancy fees to Giant Ltd.  On 1 July 2018, Expert Ltd sold an item of plant to Giant Ltd $80000. The equipment had a carrying value of $60,000 (Cost $100,000, accumulated depreciation $40,000). At the date of sale, it was expected that the equipment had a remaining life of 4 years and no residual value.  The tax rate is 30 percent. Required: a) Based on the above information, calculate the non-controlling interest as at 30 June 2019. (6.5 marks) b) Prepare the necessary journal entries to recognise the non-controlling interest as at 30 June 2019. (3.5 marks)

Answer and Explanation:

1. For computation of the non-controlling interest as at 30 June 2019 is shown below:-

Adjusted profit = Profit tax after the year - Unrealized gain in stock - Gain on machinery

= $200,000 - $10,500 - $10,500

= $179,000

Non-controlling interest as at 30 June 2019 = Share capital + Retained earning + General reserve + Profit of the year June 2019

= ($800,000 × 20%) + ($200,000 × 20%) + ($400,000 × 20%) + ($179,000 × 20%)

= $160,000 + $40,000 + $80,000 + $35,800

= $315,800

2. The Journal entries are shown below:-

a. Profit for the year Dr, $21,000

         To Stock reserves $10,500

         To Equipment reserve $10,500

(Being reserves is recorded)

Working note:

For stock reserve

Sale price $120,000

Cost $60,000

Profit before tax $60,000

Tax at 30% $18,000

Profit after tax $42,000

Unsold stock 25%

Unrealized profit $10,500

For net gain on sale of machinery

Sale price $80,000

Cost $60,000

Profit before tax $20,000

Tax at 30% $6,000

Profit after tax $14,000

Unsold stock 75% (3 years from 4 years)

Unrealized profit $10,500

b. Profit for the year Dr, $179,000

         To Consolidated reserves and surplus $35,800

          To Non controlling interest $143,200

(Being profit of expert ltd. is recorded)

Working note

Share of non controlling stakeholders = 20% × $179,000

= $35,800

Share of Giant Ltd. = 80% × $179,000

= $143,200

We do not make any adjustment with respect to consultancy fees

explanation:

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metallurgy is your answer

the "study of metals and the process of refining ("

note that it says metal. metallurgy has the word "metal" in it, and so is most likely your answer (and is your answer).

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