Reference no: EM132886775
Question - On 1 July 2020, Parent Ltd acquired 90% of the issued shares of Subsidiary Ltd on a cum div. basis. The fair value of the consideration paid was $680 000. At this date, the records of Subsidiary Ltd included the following information:
Share Capital $400,000
Retained Earnings $115,000
Dividend payable $50,000
Goodwill $25,000
The dividend liability at 1 July 2020 was paid in September 2020. At 1 July 2020, all the identifiable assets and liabilities of Subsidiary Ltd were recorded at fair value except for the following assets:
Carrying Amount Fair Value
Inventory $80,000 $100,000
Machinery $280,000 $350,000
The NCI at acquisition date is measured based on the proportionate share of the identifiable assets and liabilities in Subsidiary Ltd (use partial goodwill). The tax rate is 30%.
Required - Prepare the pre-acquisition entries only at 1 July 2020. Do not prepare BCVR entries.