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The Statement Of Financial Position

05 / 03 / 2018 Assignment

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Question 4 (35 Marks)

Part A (30 Marks)

At 1 July 2011, White Ltd acquired 80% of the share capital of Pages Ltd for $290,000 (cum div.). At this date the statement of financial position of Pages Ltd, including comparative information on fair values for assets, was as shown as follows. 

  Carrying amount Fair value

Current assets

 Inventory 60,000 65,000

 Receivables 40,000

 Allowance for doubtful debts 5,000 35,000 35,000

 Total current assets 95,000

 

 Non-current assets

 Plant and machinery (at cost) 200,000

 Accumulated depreciation125,000 75,000 90,000

 Vehicles (at cost) 80,000

 Accumulated depreciation 10,000  70,000 75,000

 Buildings (at cost) 120,000

 Accumulated depreciation 5,000 115,000 115,000

 Trademark (at valuation) 100,000 100,000

 Other assets 40,000 40,000

 Goodwill 20,000

 Total non-current assets 420,000

 Total assets515,000

 

 Equity

 Share capital 200,000

 Asset revaluation surplus 50,000

 Retained earnings50,000

 Total equity 300,000

 

 Current liabilities

 Accounts payable 40,000

 Dividend payable 20,000

 Total current liabilities 60,000

 Non-current liabilities

Debentures155,000

Total non-current liabilities 155,000  

 

 

 

 

Required:

1. Determine the gain on bargain purchase or goodwill as at acquisition date using the partial goodwill method. (2 marks)

2. Determine the gain on bargain purchase or goodwill as at acquisition date using the full goodwill method. Assume the fair value of the Non-controlling interest at 1 July 2011 was $67,000. (3 marks)

3. Prepare the consolidation journal entries for White Ltd using the full goodwill method at 1 July 2011, immediately after acquisition. (7 marks)

4. Prepare the consolidation journal entries for White Ltd using the full goodwill method at 30 June 2014. (18 marks)

 

Total liabilities215,000

Total equity and liabilities515,000

At 1 July 2011, the depreciable assets had the following remaining useful lives:

Plant and machinery 5 years

Vehicles 10 years

Trademark 100 years

Buildings 10 years

All the inventory on hand at 1 July 2011 was sold by Pages Ltd by 30 June 2012. Adjustments for differences between fair values and carrying amounts at acquisition date are made on consolidation.

 



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