Question 1
Topic 1: Consolidation: Principles and accounting requirements
On 1 July 2017, Patience Ltd acquired all the issued shares of Silence Ltd for a cash consideration of $1,000,000. At that date, the financial statements of Silence Ltd showed the following information.
All the assets and liabilities of Silence Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50,000 below its fair value with a related accumulated depreciation of $80,000. Silence Ltd accounted for all its property, plant and equipment in its own books using the cost model. In addition, Patience Ltd identified at acquisition date a contingent liability related to a lawsuit where Silence Ltd was sued by a former supplier and attached a fair value of $40,000 to that liability.
Required:
1. Prepare the acquisition analysis at 1 July 2017.
2. Prepare the consolidation worksheet entries for Patience Ltd's group at 1 July 2017.
|
Question 1
|
Max. marks allocated
|
|
Acquisition analysis (Part 1)
|
5
|
|
Consolidation worksheet entries (Part 2)
|
14
|
|
Presentation
|
1
|
|
Total
|
20
|
Question 2
Topic 2: Consolidation: Intra-group transactions
On 1 July 2016, Pandora Ltd acquired all the issued shares of Sebastian Ltd. Pandora Ltd paid $30,000 in cash and 20,000 shares in Pandora Ltd valued at $3 per share. At this date, the equity of Sebastian Ltd consisted of $66,000 share capital and $6,000 retained earnings.
At 1 July 2016, all the identifiable assets and liabilities of Sebastian Ltd were recorded at amounts equal to their fair values except for:
The plant was considered to have a further 5-year life. The patents were sold for $120,000 to an external entity on 18 August 2016. The inventory was all sold by 30 June 2017.
Required:
Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of Pandora Ltd for the year ended 30 June 2018.
Attachment:- Consolidation Worksheet.rar