On 1 July 2008 S Ltd acquires 25% of the issued capital to C Ltd for a
Question:
On 1 July 2008 S Ltd acquires 25% of the issued capital to C Ltd for a cash consideration of $60 000. At the date of acquisition, the shareholders’ equity of C Ltd is:
Share capital | $75,000 |
Additional Information:
(a) On the date of acquisition, buildings have a carrying value in the accounts of C Ltd. of $40 000 and a market value of $50 000. The buildings have an estimated useful life of 10 years after 1 July 2008.
(b) For the year ending 30 June 2009 C Ltd. records an after tax profit of $15 000, from which it pays a dividend of $5 000.
(c) For the year ending 30 June 2010 C Ltd records an after tax profit of $50 000, from which it pays a dividend of $25 000.
(d) The tax rate is 30%.
Required:
Applying the equity method of accounting, calculate the amount of goodwill at the date of acquisition and prepare the journal entries for the year ended 30 June 2009 and 30 June 2010 as required by AASB128.
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren