Solution-Calculate the amount of goodwill at the date of

Calculate the amount of goodwill at the date of acquisition

Reference no: EM132695592

Question - On 1 July 2014 Padma Ltd acquires 25 per cent of the issued capital of Jamuna Ltd for a cash consideration of $360 000. At the date of acquisition, the shareholders' equity of Jamuna Ltd is:

Share capital $450 000

Retained earnings $300 000

Total shareholders' equity $750 000

Additional information

On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July 2014.

For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 000.

For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 000.

Assume a tax rate of 30% is assumed.

Required - Apply equity method of accounting to:

(a) Calculate the amount of goodwill at the date of acquisition.

(b) Prepare the journal entries for the year ending 30 June 2015.

Reference no: EM132695592

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Calculate the amount of goodwill at the date of acquisition

Reference no: EM132695592

Reference no: EM132695592

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