Case study 5

On 1 July 2015, Key Ltd acquired 25% of the shares of Board Ltd for $400 000. The
acquisition of these shares gave Key Ltd significant infulence over Board Ltd. At this date,
the equity of Board Ltd consisted of:
Share capital $660 000
General reserve 100 000
Retained earnings 440 000
At 1 July 2015, all the identifable assets and liabilities of Board Ltd were recorded at
amounts equal to their fair values except for
Carrying amount Fair value
Land $ 1 200 000 $ 1 600 000
Plant (cost $1 200 000) 1 000 000 1 100 000
The plant was considered to have a further useful life of 5 years. The land was revalued in the
records of Board Ltd and the revaluation model applied in the measurement of the land. The
tax rate is 30%.
At 30 June 2017, Board Ltd reported the following information
Profit before tax $ 720 000
Income tax expense (300 000)
Profit after tax 420 000
Retained earnings at 1 July 2016 820 000
Dividend paid (40 000)
Dividends declared (50 000)
Transfer to general reserve (30 000)
Retained earnings at 30 June 2017 1 120 000
Share capital 640 000
General reserve 150 000
Asset revaluation surplus 310 000
Total equity 2 220 000
Board Ltd also reported other comprehensive income relating to gains on revaluation of land
of $15 000.
Required
Prepare the journal entries for inclusion in the consolidation worksheet of Key Ltd at 30 June
2017 for the accounting of Board Ltd.