On January 1, 2009, Zaldivar acquired 75% of the share capital of Burran at a cost of
Question:
On January 1, 2009, Zaldivar acquired 75% of the share capital of Burran at a cost of $27,600. At this date, the capital of Burran consisted of 30,000 common shares, and retained earnings were $6,000.
At January 1, 2009, Burran had not recorded any goodwill, and all of its identiï¬able net assets were recorded at fair value except for inventory, which had a fair value of $10,000 and a carrying value of $14,000, and plant, which had a fair value of $20,000 and a carrying value of $15,000. The plant has a remaining life of four years. The inventory is recorded on a FIFO (ï¬rst-in, ï¬rst-out) basis. Zaldivar uses the partial goodwill method. The fair value of the non-controlling interest at January 1, 2009, was $9,000.
The trial balances of the two companies as at December 31, 2013, are as shown below.
Additional information:
1. Intragroup sales of inventory for the year ended December 31, 2013, from Burran to Zaldivar were $19,000.
2. Unrealized proï¬ts on inventory held at January 1, 2013: inventory held by Zaldivar purchased from Burran at a proï¬t before tax of $800.
3. Unrealized proï¬ts on inventory held at December 31, 2013: inventory held by Zaldivar purchased from Burran at a proï¬t before tax of $1,200.
4. The cumulative other comprehensive income account relates to ï¬nancial assets held by Burran. The balance of this account at January 1, 2013, was $4,000.
5. The tax rate applicable is 30%.
Required
Prepare the consolidated ï¬nancial statements for the year ended December 31, 2013.
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
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