On 1 July 20x5 P Ltdacquired an 80% (controlling) interest in subsid ltd. At that date subsid ltd’s equity comprised:
Share capital 500,000
General reserve 150,000
Retainedearnings 100,000
Additional data:
² Subsid Ltd’sassets were measured at fair value at acquisition date.
² The NCI ismeasured at the fair value of identifiable net assets
² There was an excess (gain onbargain purchase) of $50,000.
1. The fair value of P ltd’sconsideration paid or payable for the acquisition of Subsid Ltd:
(a) cannot be ascertained
(b) $650,000
(c) $800,000
(d) $700,000
(e) $550,000
2. For the year ended30/6/x7, the excess should be recognised on consolidation:
(a) as a $50,000 credit toclosing retained earnings
(b) As a $35,000 credit toopening retained earnings
(c) As a $50,000 credit toopening retained earnings
(d) As a $50,000 credit toprofit
(e) Noneof the above
3. To increase itsmarket share, ABC Ltd acquired all the ordinary issue capital of XYZ ltd on 1July 20x3 for $4,000,000. At acquisition date, the shareholders’ equity of ABC’sLTD consisted of:
Issued capital: $1,200,000
Retained earnings: $1,600,000
General reserves: $500,000
On 1 July 20X3, land with a fairvalue of $1,400,000 was carried at a cost of $800,000 in XYZ ltd’s accountingrecords. The land was subsequently sold by XYZ ltd on 30 June 20x6 for$1,800,000 cash. The company income tax rate is 30%
An impairment loss of $30,000relating to the goodwill arising on the acquisition of XYZ ltd was recognisedduring the year ended 30 June 20x5. The directors of XYZ ltd believe that thegoodwill relating to the acquisition of XYZ ltd has been impaired by a further$40,000 during the year ended 30 June 20x6.
Required:
Prepare the consolidation journalentries for the ABC ltd group at 30 June 20x6.