Reference no: EM133140339
Question 1 - Canberra Ltd acquires all the issued capital of Adelaide Ltd on 1 July 2020. On this date the following balances are recorded in the financial statements:
Share capital $450,000
General reserve $120,000
Retained earnings $240,000
On 1 July 2020, all the identifiable assets and liabilities of Adelaide Ltd show the fair value.
Adelaide Ltd declares $15,000 of dividends from the post-acquisition profits. The financial statements of Canberra Ltd and Adelaide Ltd as at 30 June 2021 are as follows:
|
Canberra Ltd
|
Adelaide Ltd
|
|
Retained earnings (1 July 2020)
|
$270,000
|
$240,000
|
|
Profit for the period
|
105,000
|
75,000
|
|
Less divided proposed
|
(60,000)
|
(15,000)
|
|
Retained earnings (30 June 2021)
|
315,000
|
300,000
|
|
Share capital
|
2,100,000
|
450,000
|
|
General reserve
|
276,000
|
120,000
|
|
Total Equity
|
2,691,000
|
870,000
|
|
Provisions
|
90,000
|
60,000
|
|
Payables
|
45,000
|
75,000
|
|
Dividend payable
|
60,000
|
15,000
|
|
Long-term debt
|
150,000
|
330,000
|
|
Total liabilities
|
345,000
|
480,000
|
|
Total equities and liabilities
|
3,036,000
|
1,350,000
|
|
Property, plant and equipment
|
1,800,000
|
2,460,000
|
|
Accumulated depreciation - Property, plant and equipment
|
(885,000)
|
(1,950,000)
|
|
Vehicles
|
900,000
|
360,000
|
|
Accumulated depreciation - vehicles
|
(540,000)
|
(240,000)
|
|
Land
|
600,000
|
420,000
|
|
Brands
|
150,000
|
105,000
|
|
Investment in Adelaide Ltd
|
816,000
|
-
|
|
Goodwill
|
-
|
-
|
|
Cash at bank
|
15,000
|
36,000
|
|
A/Receivables
|
30,000
|
39,000
|
|
Dividend receivable
|
15,000
|
-
|
|
Inventories
|
135,000
|
120,000
|
|
Total assets
|
3,036,000
|
1,350,000
|
Required -
1. Calculate goodwill on 1 July 2020 in accordance with AASB 3 Business Combinations.
2. Prepare the consolidation journal entries for Canberra Ltd's group as at 30 June 2021.
3. Prepare consolidation worksheet for Canberra Ltd and its control entity using excel spread sheet.
4. Prepare consolidated financial statements using excel spread sheets for Canberra Ltd's group as at 30 June 2021.
Question 2 - On 1 July 2021, Ocean Ltd acquired all the issued capital of Forrest Ltd in exchange 400,000 shares where the fair value of each share was $5.00. The financial manager of Ocean Ltd reported all the financial information regarding acquisition of Forrest Ltd to the board of directors. The financial manager of Ocean Ltd calculated goodwill of $100,000 and showed it to board of directors. However, two directors were confused whether this goodwill should be appeared in the statement of financial position or not.
Required - Provide statement for the financial manager of Ocean Ltd regarding goodwill and its impact on financial statements in the current and future years consistent with AASB 3 - Business Combinations.