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Pass the necessary journal entry to record the acquisition

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Reference no: EM132698473

Question - The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is:

Fair value of assets acquired = $2,640,000

Fair value of liabilities acquired = $720,000

Total shareholders' equity of the subsidiary company = $800,000

Retained earnings of the subsidiary company = $1,120,000

Required -

(a) Pass the necessary journal entry to record the acquisition.

(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition.

(c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company (2 marks)

(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50.

Reference no: EM132698473

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