Duck Ltd acquired a 30% interest in P Ltd for $75,000 cash on 1 July 2021....

Duck Ltd acquired a 30% interest in P Ltd for $75,000 cash on 1 July 2021. The equity of P Ltd at the acquisition included share capital of $45,000 and retained earnings of $180,000. All the identifiable assets and liabilities of P Ltd were recorded at fair value except inventory which was understated by $4000.

Profits and dividends for the years ended 30 June 2022, 2023 and 2024 are given (see attachment).

Assuming Duck Ltd prepares consolidated financial statements, prepare consolidated worksheet entries to account for Duck’s investment in the associate, P Ltd for the year ending 30 June 2024.

	PBT	TAX	Div paid
2022	120,000	45,000	12,000
2023	105,000	37,500	30,000
2024	90,000	30,000	15,000

Expert Solution

Acquisition analysis

Share capital (30% of 45000)	$13500
Retained earnings	$54000
Inventory	$4000

Total	$71500
Less
Consideration	$75000
Goodwill	$3500

Consolidated worksheet entries

	Journal entry	Debit$	Credit$
	Inventory a/c	4000
	To business combination valuation reserve		4000

	Good will	3500
	To business combination valuation reserve		3500

	Preacquisition entries

	Share capital	13500
	Retained earnings	54000
	Business combination valuation reserve	7500
	Shares in P ltd		75000

2022	journal entry
	Dividend income	3600
	To dividend receivable		3600
	(30% of 12000=3600)

	Revenue	22500
	To share in profit from P Ltd		22500
	30% of net profit (120000-45000)

2023	Dividend income	9000
	To dividend receivable		9000

	Revenue	20250
	To share in profile of P Ltd		20250

2024	Dividend income	4500
	To dividend receivable		4500

	Revenue	18000
	To share in profit of P Ltd		18000

ekkarill92 answered 1 year ago

On 1 July 2021, Atlantic Ltd acquired 100% of the share capital of Pacific Ltd for...

On 1 July 2021, Atlantic Ltd acquired 100% of the share capital of Pacific Ltd for a cash consideration of $750,000. All identifiable assets and liabilities of Pacific Ltd were recorded at amounts equal to fair value, except as follows: Carrying amount Fair value Plant (cost $260,000) $130,000 $150,000 Also, the assets of Pacific Ltd included a goodwill previously recorded of $20,000. On 1 July 2021, the equity of Pacific Ltd consisted of: Share capital $500,000 Retained earnings $200,000 Additional...

On 1 July 2017 Miller Ltd acquired a 25% interest in Thomas Ltd for consideration of...

On 1 July 2017 Miller Ltd acquired a 25% interest in Thomas Ltd for consideration of $73,000. At that date the equity of Thomas Ltd consisted of: Share Capital 140 000 Retained Earnings 70 000 Asset Revaluation Surplus 12 000 Total 222 000 All assets and liabilities of Thomas Ltd are recorded at fair value with the exception of inventory which was held at $5,000 below its fair value. The entire inventory was sold during the 2017-2018 financial year. The...

On 1 July 2020 S Ltd acquired 60% of the issued shares of P Ltd. During...

On 1 July 2020 S Ltd acquired 60% of the issued shares of P Ltd. During the year ended 30 June 2021 the following intra group transactions occurred: Sales of inventory: P Ltd to S Ltd $200,000 (Cost to P Ltd $150,000) Intragroup inventory on hand 30 June 2021: S Ltd held 40% of the inventory acquired from P Ltd Intragroup sale of equipment An item of equipment originally acquired by S Ltd on 1 July 2018 at a cost...

On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange...

On July 1, 2021, Truman Company acquired a 70 percent interest in Atlanta Company in exchange for consideration of $767,200 in cash and equity securities. The remaining 30 percent of Atlanta’s shares traded closely near an average price that totaled $328,800 both before and after Truman’s acquisition. In reviewing its acquisition, Truman assigned a $138,500 fair value to a patent recently developed by Atlanta, even though it was not recorded within the financial records of the subsidiary. This patent is...

On 1 July 2022, Dean Ltd acquired all the issued shares of Lewis Ltd for a...

On 1 July 2022, Dean Ltd acquired all the issued shares of Lewis Ltd for a cash consideration of $1 000 000. At that date, the financial statements of Lewis Ltd showed the following information. Share capital $650 000 General reserve 20 000 Retained earnings 250 000 All the assets and liabilities of Lewis Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50 000 below its fair value with...

On 1 July 2019 Short Ltd acquired 80% of the shares of Tall Ltd for $436...

On 1 July 2019 Short Ltd acquired 80% of the shares of Tall Ltd for $436 200. At this date the equity of Tall Ltd consisted of share capital of $280 000 and retained earnings of $140 000. All the identifiable asset and liabilities of Tall Ltd were recorded at amounts equal to fair value except for: Carrying amount FV Land 80 000 95 000 Plant (Cost $380 000) 300 000 330 000 Inventories 15 000 18 000 The plant...

On 1 July 2017, Ukulele Ltd acquired 40% of the shares of Bongo Ltd for $99,600....

On 1 July 2017, Ukulele Ltd acquired 40% of the shares of Bongo Ltd for $99,600. At this date, all the identifiable assets and liabilities of Bongo Ltd were recorded at amounts equal to fair value except for inventory which had a fair value $9,900 greater than the carrying amount. All inventory was sold by 30 June 2018. The tax rate is 30%. Bongo Ltd was classified as an associate of Ukulele Ltd. The profits and losses recorded by Bongo...

On 1 July 2020, Tall Ltd acquired all of the assets and liabilities of Blacks Ltd....

On 1 July 2020, Tall Ltd acquired all of the assets and liabilities of Blacks Ltd. In exchange for these assets and liabilities, Tall Ltd issued 100 000 shares that at date of issue had a fair value of $6.30 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Blacks Ltd amounted to $4200. The asset and liabilities of Blacks Ltd at 1 July 2020 were as follows: Carrying amount Fair...

On 1 July 2017, Ukulele Ltd acquired 40% of the shares of Bongo Ltd for $99,500....

On 1 July 2017, Ukulele Ltd acquired 40% of the shares of Bongo Ltd for $99,500. At this date, all the identifiable assets and liabilities of Bongo Ltd were recorded at amounts equal to fair value except for inventory which had a fair value $9,900 greater than the carrying amount. All inventory was sold by 30 June 2018. The tax rate is 30%. Bongo Ltd was classified as an associate of Ukulele Ltd. The profits and losses recorded by Bongo...

Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019 for $...

Carina Ltd has acquired all the shares of Finn Ltd on 1 July 2019 for $ 225 000. The accountant for Carina Ltd, having studied the requirements of AASB 3 Business Combinations, realises that all the identifiable assets and liabilities of Finn Ltd must be recognised in the consolidated financial statements at fair value. Although he is happy about the valuation of these items, he is unsure of a number of other matters including pre-acquisition entries and business combination valuation...

Question