Prepare consolidation journal entry at date of acquisition

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Reference no: EM13912532

Nick Ltd acquired 100% of the issued capital of Wing Ltd on 1 July 2011 for $270000. The statements of financial position of the companies immediately after the acquisition are provided below. All assets have been reported following fair value.

Statement of Financial Position For the year ended 1 July 2011


Nick Ltd

Wing Ltd


$

$

Shareholders' equity

Share capital

450,000

180,000

General reserve

45,000

25,000

Retained earnings

140,000

20,000

Total shareholders' equity

635,000

225,000

Assets



Current assets


Cash at Bank

635,000

225,000

Accounts Receivable

20,000

10,000

Inventory

100,000

25,000

Non-current assets


Investment in Wing Ltd

270,000

----

Land

250,000

200,000

Plant & Equipment

100,000

80,000


620,000

280,000

Total assets

790,000

345,000

Liabilities


Current liabilities


Accounts Payable

40,000

10,000

Interest Payable

15,000

8,000

Non-current liabilities

Bank loan

100,000

102,000

Total liabilities

155,000

120,000

Net assets

635,000

225,000

Required

1. Calculate Goodwill (show workings)

2. Prepare consolidation journal entry at the date of acquisition.

3. Prepare consolidation worksheet.

4. Prepare the consolidated statement of financial position as at 1 July 2011 (immediately after the acquisition).

Reference no: EM13912532

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