Problem 5-P6.15
Please solve this problem below.
Make sure you are setting up a data field and using Excel to develop a solution.
Adaris Group, headquartered in UK, owns a 70% interest in Adaris Malaysia. The acquisition cost was £250 million. At the date of acquisition, 1 January 2016, Adaris Malaysia’s book value was £80 million, and its identifiable net assets were carried at amounts approximating fair value. Goodwill recognized for this acquisition was impaired by £30 million during the period 2016-2018. Goodwill impairment for 2019, the current year is £10 million. The following information relates to intercompany transactions:
· In 2017, Adaris sold land with a book value of £3 million to Adaris Malaysia for £5 million. Adaris Malaysia sold the land to an outside party in 2019 for £4 million.
· Adaris sells merchandise to Adaris Malaysia at a markup of 30% on cost. Adaris Malaysia’s beginning inventory contains £10.4 million in merchandise acquired from Adaris. Its ending inventory contains £14.3 million in merchandise acquired from Adaris. Adaris sold merchandise priced at £180 million to Adaris Malaysia during 2019.
· On 30 June 2016, Adaris Malaysia sold equipment with a book value of £80 million to Adaris for £60 million. The equipment had a remaining life of five years, straight-line. Adaris still holds the equipment.
It is now 31 December 2019, the end of Adaris’ accounting year. Adaris uses the complete equity method to account for its investment in Adais Malaysia on its own books. Adaris also uses IFERA alternative approach to valuing the noncontrolling interest in Adaris Malaysia. Below are the separate trial balances of Adaris Group and Adaris Malaysia at 31 December 2019.
| Adaris Group Dr (Cr) | Adaris Malaysia Dr (Cr) | |
| Current assets | £ 35,000 | £ 22,000 |
| Plant assets, net | 233,450 | 210,000 |
| Investment in Adaris Malaysia | 243,800 | 0 |
| Liabilities | -337,550 | -105,000 |
| Capital stock | -40,000 | -30,000 |
| Retained earnings, beginning | -125,000 | -75,000 |
| Sales revenue and gains | -600,000 | -490,000 |
| Equity in net income | -3,700 | 0 |
| Cost of goods sold | 430,000 | 210,000 |
| Operating expenses | 164,000 | 258,000 |
| Total | £ 0 | £ 0 |
Required
a. Calculate Adaris Group’s equity in net income and the noncontrolling interest in net income for 2019.
b. Prepare a working paper to consolidate the trial balances of Adaris Group and Adaris Malaysia at 31 December 2019. Label your eliminating entries (C), (I), (E), (R), (O), and (N).
c. Present the consolidated income statement for 2019 and the consolidated balance sheet at 31 December 2019.
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