Window Ltd Acquired a 70 Per Cent Interest in Door

question 2

Multiple Choice

Window Ltd acquired a 70 per cent interest in Door Ltd on 1 July 2003 for a cash consideration of $1,399,000. At that date fair value of the net assets of Door Ltd were represented by:

On 1 July 2004 Window Ltd purchased a further 30 per cent of the issued capital of Door Ltd for cash consideration of $665,000. At this date the fair value of the net assets of Door Ltd were represented by:

Impairment of goodwill was assessed at $4,000; relating evenly across each of the last two years. During the period ended 30 June 2005, Door Ltd proposed a dividend of $120,000. The dividend has not been paid at the end of the period, but Window Ltd has a policy of accruing the dividends of subsidiaries when they are proposed. There were no other intragroup transactions. What are the consolidation entries to eliminate the investment in the subsidiary, account for goodwill and eliminate the dividends for the period ended 30 June 2005?

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Definitions:

Norton's Theorem

An electrical theorem that simplifies complex circuits into equivalent circuits made of a single current source and parallel resistance.

Parallel Resistance

The overall resistance of resistors connected in parallel, calculated in a way that the total resistance is always less than the smallest individual resistor's resistance in the circuit.

Superposition Theorem

A principle that allows for the analysis of circuits with multiple sources by considering the effect of each source separately and then summing the results.

Closed Loop

A closed loop refers to a control system where the output influences the input through feedback to maintain desired operation characteristics.