Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Financial Accounting Expert

On 1 July 2006 ABC Ltd acquired 75% of the share capital in XYZ Ltd for $240,000 cash.  In addition to the cost of the shares ABC Ltd paid valuation fees associated with the acquisition of $20,000.  At acquisition date the equity of XYZ Ltd consisted of:

Share capital          $150,000
General reserve       8,000
Retained earnings    20,000

All the assets and liabilities of XYZ Ltd at the date of acquisition were recorded at fair value other than the following:

                                        Carrying amount         Fair value
Plant (Cost $120,000)                 $45,000               100,000
Land                                        55,000                 65,000
Contingent liability                      0                        20,000

All fair value adjustments are recorded on consolidation. The plant has a remaining useful life of 10 years. The revalued land was sold outside the group on 1 July 2007 for $75,000. The contingent liability was settled for $20,000 on 1 December 2006. The tax rate is 30%.

ABC Ltd uses the full goodwill method.  The value of the non-controlling interest has been estimated at $73,000.

Other information:

a) The inventory of XYZ Ltd on 1 July 2009 included inventory purchased from ABC Ltd for $10,000. The original cost of the inventory was $13,000. The inventory was not considered impaired at the time of the sale by ABC Ltd. The inventory was sold outside the group in September 2009.

b) The inventory of ABC Ltd on 1 July 2009 included inventory purchased from XYZ Ltd for $6,000 above cost. The inventory was sold outside the group in December 2009.

c) ABC Ltd sold inventory to XYZ Ltd on 1 February 2010 for $6,000. The original cost of the inventory was $2,500. The inventory had been entirely sold outside the group by 30 June 2010.

d) XYZ Ltd sold inventory to ABC Ltd for $16,000 on 1 June 2010. The sale price represented a mark-up of 40% on cost. By 30 June 2010 ABC Ltd had sold 90% of this inventory outside the group.

e) On 30 September 2008 XYZ Ltd sold an item of plant to ABC Ltd for $12,000. The carrying amount at the time of sale was $9,000 (cost was $12,000).  At the time of the sale the asset had a remaining useful life of 10 years.

f) ABC Ltd charged XYZ Ltd a management fee of $5,000 for the current financial year.

g) On 30 June 2010 XYZ Ltd owes ABC Ltd $12,000. XYZ Ltd paid $600 to ABC Ltd in interest on 30 June 2010.

h) Goodwill on acquisition is not considered impaired.

Required:

1) Prepare an acquisition analysis.

2) Prepare all necessary consolidation adjustment entries needed to prepare the consolidated financial statements as at 30 June 2010. The balance sheets and income statement of ABC Ltd and XYZ Ltd can be found on the worksheet below.

3) Using the adjustments you prepared in 2) complete the worksheet as at 30 June 2010.

4) Prepare the disclosures of the NCI in profit and equity for the year ended 30 June 2010.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91202

Have any Question? 


Related Questions in Financial Accounting

Financial accountingfinancial conditionbullfor this

Financial Accounting Financial Condition • For this discussion, assume the role of a financial manager in a company, and assume that you have just hired a new bookkeeper to join your team. You want to assess the new hire ...

The ryde and rowe inc had the following account balances as

The Ryde and Rowe Inc. had the following account balances as of January 1: Direct Materials Inventory $ 8,700 Work in Process Inventory 76,500 Finished Goods Inventory 53,000 Manufacturing Overhead 0 During the month of ...

Read harvard business reviews in search of a second act

Read Harvard Business Review's "In Search of a Second Act" case study. You can search for it in Business Source Complete (EBSCO) or use the see "How to find an article" in the Course Information tab. Two authors gave the ...

Question 1archer daniels midland company is considering

Question 1: Archer Daniels Midland Company is considering buying a new farm that it plans to operate for 10 years. The farm will require an initial investment of $12.00 million. This investment will consist of $2.00 mill ...

Topic cash flow statementsfor this assignment you will use

Topic Cash Flow Statements For this assignment, you will use the consolidated financial statements analyze your chosen consolidated financial statements and make recommendations to leadership based on your findings. Writ ...

Benoit company produces three products a b and c data

Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Demand for the company's products is very strong, with far more orders each month than the company can produce wi ...

Question 1a t shirt company is planning a production run

Question 1: A t shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 ...

Assignment intermediate accounting for finance working

Assignment: Intermediate Accounting for Finance Working Capital Case Study Your job is to make ABC cash flow in years 2 and 3 (positive ending cash balances); which means you must balance ABC's cash conversion cycle days ...

Intermediate accounting assignmentpart 11 the receipt of

Intermediate Accounting Assignment Part 1 1) The receipt of interest on loans would be reported on a statement of cash flows under the: A) Financing B) operating activities C) investing activities D) Interest received on ...

Budget assignmentyou have been asked to prepare the

Budget Assignment You have been asked to prepare the operating budget for a 150 room hotel, with a 50 seat Coffee Shop, a 100 seat Dining Room and a 25 seat Bar. The operating budget for the year is based on the followin ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen