Question

In: Accounting

Alma Ltd. Acquires all the issued shares (ex div.) of Davis Ltd on 1 July 2018...

Alma Ltd. Acquires all the issued shares (ex div.) of Davis Ltd on 1 July 2018 for 1762626. At this time of date Davis Ltd. recorded a dividend payable of 35000 and equity of the following –

Share capital

617000

General reserve

264000

Asset revaluation surplus

212000

All the identifiable assets and liabilities of Davis Ltd. were recorded at amount equals to their fair values at acquisition date except for the following-

Cost

Carrying amount

Fair value

Further life

Inventory

264000

475000

Land

529000

952000

Vehicle

740000

617000

1111000

5 years

Out of inventory 94% was sold by 30th June,2019 and remaining sold by 30th June,2020.

In May 2019 Davis transferred 106000 from retained earnings at 1 July,2018 to general reserve. Tax rate 30%.

  1. Prepare acquisition analysis at 1 July,2018
  2. Prepare consolidation worksheet entries at 30 June,2019.

Solutions

Expert Solution

Acquisition analysis at 1st july 2018.

Net fair value of identifiable assets and liabilities

equity (617000+264000+212000) 1093000
Add
Inventory =475000-264000= 211000 (1 - 30%) 147700
Land =952000-529000=423000(1 - 30%) 296100
Vehicle=1111000- 617000=494000(1-30%) 345800
TOTAL 1882600
Less
Consideration transferred =1762626 - 35000(dividend) 1727626
Caital reserve 154974

Consolidation worksheet entries at 30th june 2019

Accumulated depreciation 123000
Vehicle 371000
Deferred tax liability 148200
Business combination valuation reserve 345800
Depreciation expenses 98800
To accumulated depreciation 98800
(difference between carrying amount and fair value divided by useful years. 494000/5=98800
Deferred tax liability 29640
To income tax expenses 29640
(98800*30%)
Land 423000
To deferred tax liability 126900
To Business combination valuation reserve 296100
Inventory 12660
To deferred tax liability 3798
To Business combination valuation reserve 8862
(211000 *6% =12660)
Cost of sales 198340
To Income tax expenses 59502
To transfer from business combination valuation reserve 138838
(94% inventory sold , 211000 * 94%)

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Alma Ltd. Acquires all the issued shares (ex div.) of Davis Ltd on 1 July 2018...
Alma Ltd. Acquires all the issued shares (ex div.) of Davis Ltd on 1 July 2018 for $2285382. At this time of date Davis Ltd. recorded a dividend payable of $46000 and equity of the following – Share capital $800000 Asset Revaluation surplus $343000 Retained Earnings $274000 All the identifiable assets and liabilities of Davis Ltd. were recorded at amount equals to their fair values at acquisition date except for the following- Cost Carrying amount Fair value Inventory 343000 617000...
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div....
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of: Share capital – 500 000 shares $ 1,000,000 Retained earnings 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50, 000 at the acquisition date. The dividend payable was subsequently paid in September 2018. At the acquisition date, all the identifiable assets and liabilities of...
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div....
On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of: Share capital – 500 000 shares: $ 1,000,000 Retained earnings: 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50, 000 at the acquisition date. The dividend payable was subsequently paid in September 2018. At the acquisition date, all the identifiable assets and liabilities of...
On 1 July 2019, Batman Ltd acquired all the issued shares (cum div.) of Robin Ltd...
On 1 July 2019, Batman Ltd acquired all the issued shares (cum div.) of Robin Ltd for $150 000. At this date the equity of Robin Ltd consisted of: Share capital $75 000 Retained earnings $22 500 At this date, Robin Ltd had recorded a dividend payable of $22 500 which was paid in August 2019. All the identifiable assets and liabilities of Robin Ltd were recorded at amounts equal to fair values except for inventory for which the fair...
On 1 July 2020 Mango Ltd acquired all the issued shares (cum div.) of Cream Ltd...
On 1 July 2020 Mango Ltd acquired all the issued shares (cum div.) of Cream Ltd for $450,000. At date of acquisition the equity of Cream was recorded at: Share Capital              $200,000 Reserves                     $100,000 Retained earnings      $100,000 The fair value of land was $220,000 (carrying amount $200,000). The fair value of equipment was $230,000 (cost $240,000 and carrying amount $210,000). On this date the records of Cream Ltd showed goodwill at cost of $10,000 and dividends payable of $15,000. All other...
Blue Ltd acquired on 1 July 2019 all the issued shares (cum div.) of ‘Pink’ Ltd...
Blue Ltd acquired on 1 July 2019 all the issued shares (cum div.) of ‘Pink’ Ltd for $33 000. At this date, the equity of ‘Pink’ Ltd was as follows. Share Capital $ 20 000 General Reserve 2 000 Retained Earnings 5 000 All the identifiable assets and liabilities of ‘Pink’ Ltd were recorded at amounts equal to their fair values except for the following. Carrying Amount Fair Value Plant Cost ($22 000) $18 000 $18 600 Land 19 000...
On 1 July, 2018 Bundoora Ltd acquires 25 percent of the issued capital of Preston Ltd...
On 1 July, 2018 Bundoora Ltd acquires 25 percent of the issued capital of Preston Ltd for a cash consideration of $150,000. At the date of acquisition, the share capital and retained earnings of Preston Ltd are as follows: Share capital $120,000 and Retained earnings $480,000 (Total Shareholders’ equity $600,000). Additional information:  For the year ending 30 June 2019 Preston Ltd records an after-tax profit of $50,000 from which it pays a dividend of $30,000.  For the year...
On 1 July 2012 Sarah Ltd acquires all the shares in Jane Ltd for $707,000 cash...
On 1 July 2012 Sarah Ltd acquires all the shares in Jane Ltd for $707,000 cash The financial statements of Jane Ltd as at 1 July 2012 shows the following:                         Retained earnings    197,000                         Share capital             259,000 The tax rate is 30% At the date of acquisition all the net assets of Jane Ltd are at fair value except for the following: Carrying amount Fair value Equipment (cost $257,000) $101,000 $142,000 The equipment has a further 18 years of...
On 1 July, 2018 Bundoora Ltd acquires 25 per cent of the issued capital of Preston...
On 1 July, 2018 Bundoora Ltd acquires 25 per cent of the issued capital of Preston Ltd for a cash consideration of $150,000. At the date of acquisition, the share capital and retained earnings of Preston Ltd are as follows: Share capital $120,000 and Retained earnings $480,000 (Total Shareholders’ equity $600,000). Additional information:  For the year ending 30 June, 2019 Preston Ltd records an after tax profit of $50,000 from which it pays a dividend of $30,000.  For...
On 1 July, 2018 Bundoora Ltd acquires 25 per cent of the issued capital of Preston...
On 1 July, 2018 Bundoora Ltd acquires 25 per cent of the issued capital of Preston Ltd for a cash consideration of $150,000. At the date of acquisition, the share capital and retained earnings of Preston Ltd are as follows: Share capital $120,000 and Retained earnings $480,000 (Total Shareholders’ equity $600,000). Additional information: For the year ending 30 June, 2019 Preston Ltd records an after tax profit of $50,000 from which it pays a dividend of $30,000. For the year...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT