On 1 July 2021 Tommy Ltd acquired 100% interest in Hill Ltd. Consideration consisted of $500,000 cash and a share issue of 60,000 shares in Tommy Ltd. These shares were valued at a market rate of $4.00 on 1 July 2021.

At that date, Hill Ltd.’s net assets were represented by its shareholders’ equity consisting of share capital of $200,000, retained earnings of $250,000 and general reserve of $20,000.

On the date of the acquisition, Tommy Ltd and Hill Ltd agreed the following;

1. Hill Ltd’s land had a fair value of $180,000 and had a carrying amount of $115,000 in Hill Ltd’s Balance sheet.
2. Hill Ltd had inventories that were $5,000 lower than fair value. These inventories were sold to external parties by 30 June 2022 for $308,000.
3. Hill Ltd records a machine with a carrying amount of $400,000. However the fair value of this asset is $600,000 on acquisition date. The machine has a further 5 year useful life.
4. An interim dividend was paid by Hill Ltd during the year.

Required

a) Prepare an acquisition analysis at 1 July 2021.

b) Prepare consolidated worksheet entries for the year ending 30 June 2022. Include narrations and a reference number per entry.

c) A consolidation worksheet for the year ended 30 June 2022. Please enter each entry as a separate amount and not as aggregated totals from part (b) above.

d) Prepare a consolidated Statement of Changes in Equity for the Tommy Ltd group as at 30 June 2022.

Answer rating: 100% (QA)

a Acquisition Analysis at 1 July 2021 1 Calculate the total consideration transferred Cash paid 500000 Value of shares issued 60000 shares 400share 24... View the full answer