On 30 June 2020 Pink Ltd acquired all assets (except for cash) and assumed all liabilities (except fordebentures) of Purple Ltd. At this date, the carrying amounts of assets and liabilities of Purple Ltdwere at fair value and consisted of:$15,00032,00040,000CashAccounts payable$9,000Accounts receivableDebentures (10%)Share capital ($2 shares)Retained earnings40,000Inventory110,000Shares in listed companies90,00048,000Motor Vehicle45,000Accumulated depreciation(15,000)In exchange for these net assets, Pink Ltd agreed to:issue two (2) Pink Ltd shares for every five (5) shares in Purple Ltd.On 30 June 2020 Pink Ltd shares were valued at $5.50provide sufficient additional cash in order for Purple Ltd to payout the debentures (including interest) and liquidation costs of $3,500.Required:Prepare an acquisition analysis for Pink Ltd's acquisition of Purple Ltd.wwww

Acquisition means when one company purchases another company. In other words, when one company holds…

Answered: On 30 June 2020 Pink Ltd acquired all…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On 1 July 2021, James Ltd acquired all the issued shares of Dean Ltd for $350,000. At this date, the financial statements of Dean Ltd showed the following: $ Share capital 270,000 Retained earnings 26,500 General Reserve 8,800 Total equity 305,300 Goodwill 25,000 At acquisition date, all the net identifiable assets and liabilities in Dean Ltd were recorded at amounts equal to their fair value except for: Asset Carrying amount ($) Fair Value ($) Inventories 15,000 18,000 Plant (cost $400,000) 210,000 220,000 The Plant was calculated to have a further life of 5 years, and was depreciated on a straight-line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: Prepare the acquisition analysis at 1 July 2021. Prepare the consolidation entries at acquisition date, 1 July 2021. Include narrations for each entry. Prepare the consolidation worksheet as at 1 July 2021. Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2021 in narrative format.
On 1 July 2020, Sky Ltd acquired 70% of the share capital (ex. div.) of Jim Ltd for $500,000. At that date, the relevant balances in the records of Jim Ltd were: Share capital General reserve Retained earnings Dividend payable S 434,000 35,000 126,000 14,000 At the date of acquisition all assets and liabilities of Jim Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets: Carrying amount Fair value Land Machine 56,000 30,800 Land was sold on 1 May 2023 for $77,000. $ 67,200 49,000 The cost of the Machine was $58,800 and had a further 5-year life as at the date of acquisition. Jim Ltd had reported a Contingent liability at 1 July 2020 in relation to claims by customers for damaged goods. Sky Ltd placed a fair value of $12,600 on these claims at acquisition date. This claim was settled on 1 April 2023 for $7,000. Additional information: a) On 1 March 2023, Jim Ltd purchased inventory from Sky Ltd for $25,200,…
On 1 July 2019, SydMel Ltd acquired 80% of the issued shares of Sydney Ltd for $165 000. At this date, the equity of Lee Ltd was: Share capital $100 000 General reserve 40 000 Retained earnings 50 000 At acquisition date all the identifiable assets and liabilities of Sydney Ltd were recorded at amounts equal to fair value. At 30 June 2021, the equity of Sydney Ltd consisted of: Share capital $100 000 General reserve 50 000 Retained earnings 80 000 During the 2020–21-year Sydney Ltd recorded a profit of $15 000. Required: Prepare the consolidated worksheet entries at 30 June 2021 for SydMel Ltd assuming: At 1 July 2019, the fair value of the non-controlling interest was $39 000 and SydMel Ltd adopts the full goodwill method. SydMel Ltd adopts the partial goodwill method.
Sailor Berhad acquired all the shares in Mon Berhad on 31 December 2022 for a cost of RM900,000. The statement of financial poistion of both companies for the year ended 31 December 20221 were as follows: Non-current assets Investment in Mon Berhad at cost Current assets Ordinary share Retained earnings Current liabilities Sailor Berhad RM'000 1,600 900 380 2,880 1,000 1,580 300 2,880 Mon Berhad RM'000 750 300 1,050 500 300 250 1,050 Required: Explain by way of calculation on how to prepare the consolidated statement of financial position for the group as at 31 December 2022.
On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for $1,800,000, and on that date Queen Ltd.'s equity were as follows: Share capital $1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000. All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July 2021. During the financial year 2022, the following intragroup transactions occurred between King Ltd and Queen Ltd: Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost. The land was still hold by King Ltd. King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate of 10% p.a. on cost. Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. 1/4th of the inventories were still on hand with King Ltd. King Ltd received $15,000 of service revenue from Queen Ltd. Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd. The tax rate…
Unicorn Ltd acquired 80% of the issued shares of Pegasus Ltd for $685,700 on 1 July 2020. The financial statements of Pegasus Ltd showed the following items of equity: Share capital $565,500 Retained earnings $247,400 At acquisition date all the identificable assets and liabilities of Pegasus Ltd were recorded at amounts equal to fair value except for the following: Carrying amount Fair value Land $395,900 $424,100 During the year end 30 June 2021, Pegasus Ltd recorded at profit of $84,800. The tax rate is 30%. Required: Show the acquisition analysis as at 1 July 2020 and prepare the consolidated worksheet entries at 30 June 2021 for Unicorn Ltd assuming that it adopts the partial goodwill method.
Grandview Ltd acquired 100% of the issued capital of Electro Ltd on 1 July 2021 for $110,000 At that date the shareholders' equity of Electro Ltd was: Share Capital General Reserves Retained Earnings 16,000 S60,000 15,000 During the year ended 30 June 2021: Electro Ltd sold goods to Grandview Ltd for 70,000 and unrealised profit in closing inventory of Grandview Ltd was $6,000, During the year Electro Ltd paid an interim dividend of $4,000 and at 30June 2021 they provided for a final dividend of $6,000. No impairment of goodwill occurred. Required: (a) Journal entries to eliminate the investment in Electro Ltd by Grandview Ltd. (b) Journal entries to eliminate any other inter-company transactions.
On 1 July 2021, Safe Ltd acquired 100% of the shares of Mission Ltd for $500,000. On 1 July 2021, the equity of Mission Ltd consisted of: Share capital $300,000 General reserve $60,000 Retained earnings $75,000 All the identifiable assets and liabilities of Mission Ltd were recorded at fair value on 1 July 2021 except for: Carrying amount Fair value Inventories $ 90,000 $100,000 Plant (cost $300,000) $180,000 $200,000 The above plant has a further 5-year life with nil residual value and is expected to be used evenly over that time. During the year ended 30 June 2022, all inventories on hand at 1 July 2021 are sold. Corporate tax rate is 30%. The following intragroup transactions take place after the acquisition: a) On 1 May 2022, Mission Ltd sells inventory costing $50,000 to Safe Ltd for $80,000. On 30 June 2022, only 70% of these goods have been sold by Safe Ltd. b) On 1 March 2023, Mission Ltd sells inventory to Safe Ltd costing $120,000 for $160,000. At 30 June 2023, 20% of this…
On 1 July 2019, Quick Buck Ltd took control of the assets and liabilities of Eldorado Ltd. Quick Buck Ltdissued 80,000 shares having a fair value of $2.40 per share in exchange for the net assets of EldoradoLtd. The costs of issuing the shares by Quick Buck Ltd cost $1,600.At this date the statement of financial position of Eldorado Ltd was as follows: c Carrying amount Fair valueMachinery $40,000 $67,000Fixtures & fittings 60,000 68,000Vehicles 35,000 35,000 Current assets 10,000 12,000Current liabilities (16,000) (18,000)Total net assets…
DDaniel Ltd purchased 75 per cent of the issued capital and in the process gained control over Riccardo Ltd on 1 July 2020. The fair value of the net assets of Riccardo Ltd at purchase was represented by: Share Capital $3,760,000 Retained Earnings 1,320,000 Daniel Ltd paid cash consideration of $4 000 000 for Riccardo Ltd. During the period ended 30 June 2021, Riccardo Ltd paid management fees of $540 000 to Daniel Ltd and Riccardo Ltd had an operating profit of $980 000. Riccardo Ltd's opening retained earnings at the beginning of the period were $1 460 000. At the end of the period Riccardo Ltd declared a dividend of $90 000. There were no other inter-company transactions. Goodwill was determined to have been impaired by $19 000 during the period. Companies in the group accrue dividends when they are declared by subsidiaries.For the period ended 30 June 2021, what consolidation journal entries are required and what is the non-controlling interest?
On 1 January 2020 Harleen Inc purchased 1,275 ordinary shares in Shresta Inc , paying £5,300 by cheque. At the time of purchase, Shresta Inc’s profit and loss account balance were £1,000 and share premium was £500. The following are the statement of financial positions of Harleen Inc and Shresta Inc: Statement of Financial Position as at 31 December 2020 Harleen Inc Shresta Inc Non-Current Assets £ £ £ £ Buildings 10 000 4000 Motor Vehicles 7000 900 Investment in Shresta Inc 5300 22300 4900 Current Assets Inventory 1200 800 Trade Receivables 1500 260 Bank 300 390 Cash 50 10 3050 1460 Current Liabilities Trade Payables 5600 800 (2550) 660 19750 5560 Non-Current Liabilities Loans 6000…
On 1 July 2020 Harry Ltd purchased 70 per cent of the issued share capital of Wills Ltd and has control of Wills. The fair value of the net assets of Wills Ltd on that date was represented as follows: Share Capital $1,800,000 Retained 400,000 2,200,000 Harry Ltd paid cash consideration of $2,000,000 for Wills. Wills Ltd made an operating profit of $450,000, there were no intragroup transactions during the period ended 30 June 2021. Goodwill had been determined to have been impaired during the year by $45,000. What consolidation journal entries are required for the period and what is the non-controlling interest in equity as at 30 June 2021?

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