On 1 July 2040, Freemantle Ltd acquired all the issued shares of Kununurra Ltd for $5,600,000....

  

Transcribed Image Text:

On 1 July 2040, Freemantle Ltd acquired all the issued shares of Kununurra Ltd for $5,600,000. At this date the equity of Kununurra Ltd consisted of: Share capital Retained earnings General reserve 2,000,0000 2,400,000 400,000 The identifiable assets and liabilities recorded on the balance sheet of Kununurra Ltd were at amounts equal to fair value except for: Original Cost $ Carrying Amount $ Fair Value $ Inventory 608,000 720,000 Equipment 4,000,000 2,400,000 2,720,000 Additional information: • Kununurra Ltd also had a Brand Name with a fair value of $800,000 that was not recognised on its balance sheet • The Brand Name was determined to have an indefinite useful life • It was estimated that the Equipment had a further life of five (5) years, and was depreciated on a straight-line basis • All of the inventories were sold by 30 June 2041 Kununurra transferred $640,000 from retained earnings to the general reserve on 30 June 2041 Adjustments for differences between carrying amounts and fair values at acquisition date are made on consolidation • The tax rate is 30% Required: (a) Provide a table to show the acquisition analysis of Kununurra at 1 July 2040; clearly show any supporting calculations. (4 marks) (b) Prepare the pre-acquisition entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2041. (5 marks) (c) Prepare the business combination valuation reserve (BCVR) entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2042. (7 marks) (d) Prepare the pre-acquisition entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2042. (4 marks) On 1 July 2040, Freemantle Ltd acquired all the issued shares of Kununurra Ltd for $5,600,000. At this date the equity of Kununurra Ltd consisted of: Share capital Retained earnings General reserve 2,000,0000 2,400,000 400,000 The identifiable assets and liabilities recorded on the balance sheet of Kununurra Ltd were at amounts equal to fair value except for: Original Cost $ Carrying Amount $ Fair Value $ Inventory 608,000 720,000 Equipment 4,000,000 2,400,000 2,720,000 Additional information: • Kununurra Ltd also had a Brand Name with a fair value of $800,000 that was not recognised on its balance sheet • The Brand Name was determined to have an indefinite useful life • It was estimated that the Equipment had a further life of five (5) years, and was depreciated on a straight-line basis • All of the inventories were sold by 30 June 2041 Kununurra transferred $640,000 from retained earnings to the general reserve on 30 June 2041 Adjustments for differences between carrying amounts and fair values at acquisition date are made on consolidation • The tax rate is 30% Required: (a) Provide a table to show the acquisition analysis of Kununurra at 1 July 2040; clearly show any supporting calculations. (4 marks) (b) Prepare the pre-acquisition entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2041. (5 marks) (c) Prepare the business combination valuation reserve (BCVR) entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2042. (7 marks) (d) Prepare the pre-acquisition entries for the consolidation worksheet for the Freemantle Ltd Group for the financial year ended at 30 June 2042. (4 marks)

Answer rating: 100% (QA)

a Share capital 2000000 Retained earnings 2400000 General reserve 400000 Brand Name 800000 Equipment ... View the full answer