Reference no: EM132710002
On 1 July 2017, Sun Ltd acquired all the issued capital of Moon Ltd for a cash payment of $710 000 when the equity of Moon Ltd was:
Share capital $580 000
Retained earnings $ 50 000
At 1 July 2017, all assets of Moon Ltd were fairly valued, with the exception of an item of plant, with a carrying amount of $330 000, but a fair value of $390 000. The plant was initially acquired by Moon Ltd on 1 July 2013 for $550 000 when it had an estimated useful life of 10 years, with no residual value.
Tax rate is 30%. Sun Ltd also has small shareholdings in other companies.
(a) Prepare a acquisition analysis and determine the amount of goodwill or gain on bargain purchase at acquisition.
(b) Prepare the acquisition elimination journal entries for consolidation as at 30 June 2020.
(c) Goodwill has been impaired by $10 000 for the year ending 30 June 2020. Previous impairments to goodwill recorded in prior years total $8 000.
Prepare the consolidation elimination journal entries for the year ending 30 June 2020.
(d) Moon Ltd is charged management fees every month by Sun Ltd.
During the year ending 30 June 2020, Moon Ltd paid a total of $20 800 in management fees to Sun Ltd.
Moon Ltd's management fee payable balance was $6 100 at 30 June 2019, but this had dropped to $4 200 on 30 June 2020.
Problem 1: Prepare the consolidation elimination journal entries for the year ending 30 June 2020.
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