On 1 January 2022, Kiama Ltd acquired all the share capital of Gerringong Ltd for $300...

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On 1 January 2022, Kiama Ltd acquired all the share capital of Gerringong Ltd for $300 000. The equity of Gerringong Ltd at 1 January 2022 was as follows. Share capital Retained earnings General reserve At this date, all identifiable assets and liabilities of Gerringong Ltd were recorded at fair value. On 1 May 2025, Gerringong Ltd transferred $15 000 from the general reserve (pre-acquisition) to retained earnings. The income tax rate is 30%. The following information has been provided about transactions between the two entities. (a) The beginning and ending inventories of Kiama Ltd and Gerringong Ltd in relation to the current period ended on 31 December 2025 included the following inventories transferred intragroup. Beginning inventories Transfer price Original cost Ending inventories Transfer price Original cost Kiama Ltd $200 000 50 000 20 000 $2 000 1400 500 300 Gerringong Ltd $1200 800 900 700 Kiama Ltd sold inventories to Gerringong Ltd during the current period for $3000. This was $500 above the cost of the inventories to Kiama Ltd. Gerringong Ltd sold inventories to Kiama Ltd in the current period for $2500, recording a pre-tax profit of $800. (b) Kiama Ltd sold an inventories item to Gerringong Ltd on 1 July 2025 for use as machinery. The item cost Kiama Ltd $4000 and was sold to Gerringong Ltd for $6000. Gerringong Ltd depreciated the item at a rate of 10% p.a. on cost. (c) On 31 December 2025, Gerringong Ltd owes Kiama Ltd $1000 for items sold on credit. (d) Gerringong Ltd undertook an advertising campaign for Kiama Ltd during the period ended 31 December 2025. Kiama Ltd was charged and paid $8000 to Gerringong Ltd for this service. (e) Kiama Ltd received dividends totalling $63 000 during the current period ended 31 December 2025 from Gerringong Ltd. These dividends were declared in the current period out of post-acquisition profits. Required 1 Prepare the acquisition analysis at January 2032. 2. Prepare the business combination valuation entries and pre-acquisition entries at 1 January 2022. 3. Prepare the business combination valuation entries and pre-acquisition entries at 31 December 2025. 4. Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2025. On 1 January 2022, Kiama Ltd acquired all the share capital of Gerringong Ltd for $300 000. The equity of Gerringong Ltd at 1 January 2022 was as follows. Share capital Retained earnings General reserve At this date, all identifiable assets and liabilities of Gerringong Ltd were recorded at fair value. On 1 May 2025, Gerringong Ltd transferred $15 000 from the general reserve (pre-acquisition) to retained earnings. The income tax rate is 30%. The following information has been provided about transactions between the two entities. (a) The beginning and ending inventories of Kiama Ltd and Gerringong Ltd in relation to the current period ended on 31 December 2025 included the following inventories transferred intragroup. Beginning inventories Transfer price Original cost Ending inventories Transfer price Original cost Kiama Ltd $200 000 50 000 20 000 $2 000 1400 500 300 Gerringong Ltd $1200 800 900 700 Kiama Ltd sold inventories to Gerringong Ltd during the current period for $3000. This was $500 above the cost of the inventories to Kiama Ltd. Gerringong Ltd sold inventories to Kiama Ltd in the current period for $2500, recording a pre-tax profit of $800. (b) Kiama Ltd sold an inventories item to Gerringong Ltd on 1 July 2025 for use as machinery. The item cost Kiama Ltd $4000 and was sold to Gerringong Ltd for $6000. Gerringong Ltd depreciated the item at a rate of 10% p.a. on cost. (c) On 31 December 2025, Gerringong Ltd owes Kiama Ltd $1000 for items sold on credit. (d) Gerringong Ltd undertook an advertising campaign for Kiama Ltd during the period ended 31 December 2025. Kiama Ltd was charged and paid $8000 to Gerringong Ltd for this service. (e) Kiama Ltd received dividends totalling $63 000 during the current period ended 31 December 2025 from Gerringong Ltd. These dividends were declared in the current period out of post-acquisition profits. Required 1 Prepare the acquisition analysis at January 2032. 2. Prepare the business combination valuation entries and pre-acquisition entries at 1 January 2022. 3. Prepare the business combination valuation entries and pre-acquisition entries at 31 December 2025. 4. Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2025.

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1 Acquisition analysis at 1 January 2022 Kiama Ltd acquired all shares of Gerringong Ltd for 300000 ... View the full answer