On 1 July 2019, John Ltd acquired all the issued shares of Wayne Ltd for $250,000....
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On 1 July 2019, John Ltd acquired all the issued shares of Wayne Ltd for $250,000. At this date, the financial statements of Wayne Ltd showed the following: Share capital Retained earnings General Reserve Total equity 170,000 30,500 4,800 205,300 At acquisition date, all the net identifiable assets and liabilities in Wayne Ltd were recorded at amounts equal to their fair value except for: Carrying amount ($) Fair Value ($) 8,000 210,000 Asset Inventories Plant (cost $400,000) 5,000 200,000 The records also showed that the company had recorded existing goodwill of $5,000. The Plant was calculated to have a further life of 5 years, and was depreciated on a straight- line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: (a) Prepare the acquisition analysis at 1 July 2019. (6 marks) (b) Prepare the consolidation entries at acquisition date, 1 July 2019. Include narrations for each entry. (15 marks) (c) Prepare the consolidation worksheet as at 1 July 2019. (13 marks) (d) Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in narrative format. (6 marks) Financial statements John Ltd Wayne Ltd Adjustments Group Debit Credit Share capital 200,000 170,000 Retained earnings General Reserve BCVR Total Equity 50,000 30,500 4,800 250,000 205,300 Current Assets Inventory Other assets 30,000 5,000 41,300 Non-current Assets Plant (at cost) Accumulated depreciation -25,000 Goodwill Investment in Kelly Ltd Total Assets 45000 400,000 -200,000 5,000 250,000 300,000 251,300 Current Liabilities Deferred Tax liability 50,000 Debentures 46,000 Net Assets 250,000 205,300 On 1 July 2019, John Ltd acquired all the issued shares of Wayne Ltd for $250,000. At this date, the financial statements of Wayne Ltd showed the following: Share capital Retained earnings General Reserve Total equity 170,000 30,500 4,800 205,300 At acquisition date, all the net identifiable assets and liabilities in Wayne Ltd were recorded at amounts equal to their fair value except for: Carrying amount ($) Fair Value ($) 8,000 210,000 Asset Inventories Plant (cost $400,000) 5,000 200,000 The records also showed that the company had recorded existing goodwill of $5,000. The Plant was calculated to have a further life of 5 years, and was depreciated on a straight- line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: (a) Prepare the acquisition analysis at 1 July 2019. (6 marks) (b) Prepare the consolidation entries at acquisition date, 1 July 2019. Include narrations for each entry. (15 marks) (c) Prepare the consolidation worksheet as at 1 July 2019. (13 marks) (d) Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in narrative format. (6 marks) Financial statements John Ltd Wayne Ltd Adjustments Group Debit Credit Share capital 200,000 170,000 Retained earnings General Reserve BCVR Total Equity 50,000 30,500 4,800 250,000 205,300 Current Assets Inventory Other assets 30,000 5,000 41,300 Non-current Assets Plant (at cost) Accumulated depreciation -25,000 Goodwill Investment in Kelly Ltd Total Assets 45000 400,000 -200,000 5,000 250,000 300,000 251,300 Current Liabilities Deferred Tax liability 50,000 Debentures 46,000 Net Assets 250,000 205,300
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