Prepare an acquisition analysis as at date of acquisition

Reference no: EM132703376

On 1 July 2018, Red Ltd acquired 60% of Bill Ltd's share capital for $500,000. At acquisition date, Bill Ltd's equity consisted of:

Share capital $620,000
Retained earnings 140,000
General reserve 30,000

At acquisition date, all the identifiable assets and liabilities of Bill Ltd were recorded at amounts equal to fair value, except for a quantity of inventory whose fair value was $20,000 higher than its carrying amount. Additional information relating to the year ended 30 June 2019:

Bill Ltd recorded an after tax profit of $25,000.
The re-valued inventory was sold to an external party.
Bill Ltd declared a dividend of $28,000. The dividends are from post-acquisition earnings and revenue is recognised on declaration.
During the year Bill Ltd sold inventory to Red Ltd for $16,000, recording a profit before tax of $5,000. By 30 June 2019, 25% of the inventory remained unsold by Red Ltd.
The tax rate is 30%.

Question 1. Prepare an acquisition analysis as at date of acquisition using the partial goodwill method.

Question 2. Prepare all journal entries required for consolidation purposes at 30 June 2019.

Reference no: EM132703376

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