Question: On January 1 2013 Serpens Ltd acquired the issued shares

On January 1, 2013, Serpens Ltd. acquired the issued shares (cum div.) of Vela Ltd. for $120,000. At that date, the financial statements of Vela included the following items:
Share capital .......... $52,500
Retained earnings .......... 54,000
Dividend payable.......... 7,500
At January 1, 2013, Vela had recorded goodwill of $2,000, and all its identifiable assets and liabilities were recorded at fair value. Share capital represents 75,000 shares. The dividend was paid on June 30, 2013. The tax rate is 30%.
Prepare the pre-acquisition adjustments for the preparation of consolidated financial statements at:
(a) January 2013, immediately after combination.
(b) December 31, 2013.

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  • CreatedJune 09, 2015
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