a question

ow acquired 60% of the 1 million ordinary shares of Kim on July 2006 for $3,250,000 when Kim’s retained earnings were $2,760,000. The group policy is to measure non-controlling interests at fair value at the date of acquisition. The fair value of NCI at 1 July 2006 was $1,960,000. There has been no impairment of goodwill since the date of acquisition.

Dow acquired a further 20% of Kim’s share capital on 1 March 2007 for $1,000,000.

The retained earnings reported in the financial statements of Dow and Kim as at 30 June 2007 are $9,400,000 and $3,400,00 respectively.

Kim sold goods for resale to Dow with a sales value of $750,000 During the period from 1 March 2007 to 30 June 2007. 40% of these goods remain in Dow’s inventories at the year-end. Kim applies a mark-up of 25% on all goods sold.

Profits of both entities can be assumed to accrue evenly throughout the year.

Required: Calculate the amounts that will appear in the consolidated statement of financial position of the Dow Group as at 30 June 2007 for:

(a) Goodwill;

(b) Consolidated retained earnings;

(c) NCI.