Black Ltd paid $20,000 to acquire 100% of the issued shares of White Ltd at 1 July
Fantastic news! We've Found the answer you've been seeking!
Question:
Black Ltd paid $20,000 to acquire 100% of the issued shares of White Ltd at 1 July 2018 when the subsidiary’s equity consisted of issued capital of $10,000 and retained earnings of $5,000. At the acquisition date, all assets and liabilities of White Ltd were recorded at their fair values, except for the following:
- - A piece of land with a carrying amount of $5,000 and a fair value of $6,000.
- - An item of plant with a book value of $1,200 and a fair value of $2,000. Its cost to White was 1,600. The plant has a remaining useful life of 4 years.
- - A contingent liability (it satisfied AASB 3 to be recognized on consolidation) with an estimated fair value of $500. This contingent liability had not been recognized by White Ltd at the date of acquisition.
Additional information:
- - The land was sold on 15 June 2020.
- - The contingent liability was settled on 1 September 2020 for $300.
- - Transaction 1: At 1 August 2018, Black sold inventory to White at a 25% mark-up. The inventory had originally cost Black $3,000. The inventory was all sold by 30 June 2019.
- - Transaction 2: At 1 September 2018, White sold inventory to Black at a 25% mark-up. The inventory had originally cost White $2,000. By 30 June 2019, Black held 30% of the inventory purchased from white. By 30 June 2020, Black still held 10% of the inventory purchased from White. The inventory was all sold by 30 June 2021.
- - Assume 30% tax rate and periodic inventory system
Required:
Based on the information provided, prepare the consolidation adjustment journals for the year ended 30 June 2020 (i.e. 2 years after the acquisition date). Provide narrations that include all relevant calculations.
Related Book For
Canadian Income Taxation planning and decision making
ISBN: 9781259094330
17th edition 2014-2015 version
Authors: Joan Kitunen, William Buckwold
Posted Date: