Reference no: EM132845633
Question - On 1 July 2020, Kerry Ltd acquired 100% of the issued shares of James Ltd on a cum div. basis.
The fair value of the consideration paid was measured at $250,000. At this date, the records of James Ltd included the following information:
Share Capital $200,000
Retained Earnings $20,000
Asset Revaluation reserve $5,000
Dividends payable $5,000
Goodwill $2,000
The dividend liability at 1 July 2020 was paid in September 2020. At 1 July 2020, all the identifiable assets and liabilities of James Ltd were recorded in the subsidiary's books at fair value except for the following assets:
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Carrying Amount
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Fair Value
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Inventory
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$40,000
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$46,000
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Property and Equipment
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$100,000
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$115,000
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The inventory was all sold by 30 June 2021. The Property and equipment has a further 5-year life and is depreciated on a straight-line basis. Goodwill was not impaired in any period. When assets are sold or fully consumed, any relating business combination valuation reserve is transferred to retained earnings. The tax rate is 30%.
Required - Prepare Acquisition analysis as at 1 July 2020?
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