Exercise 29.6 Undervalued assets, full and partial goodwill method On 1 July 2022, James Ltd acquired 90% of the issued shares of Cameron Ltd for $145 080. The equity of Cameron Ltd at this date consisted of:

Share capital $100 000

Retained earnings $40 000

The carrying amounts and fair values of the assets and liabilities recorded by Cameron Ltd at 1 July 2022 were as follows.

All inventories on hand at 1 July 2022 are sold by 30 June 2023. The fittings and machinery have a further 10-year life beyond 1 July 2022, with benefits to be received evenly over this period. Differences between carrying amounts and fair values are recognised in the consolidation worksheet. James Ltd uses the partial goodwill method. The tax rate is 30%.

Required 1. Prepare the acquisition analysis at acquisition date. 2. Prepare the business combination valuation entries and the pre-acquisition entry at

acquisition date. 3. Prepare the journal entry to recognise NCI at acquisition date. 4. Prepare the consolidation worksheet entries at 30 June 2023. Assume a profit for

Cameron Ltd for the year ended 30 June 2023 of $20 000 and no other changes in

Cameron Ltds equity since the acquisition date. 5. Identify and prepare the journal entries in requirements 2 to 4 that will change if the

full goodwill method is used. Assume a fair value for NCI on 1 July 2022 of $15 900. (LO3, LO4 and LO5)

Carrying amount Inventories Fittings (net) $ 5 000 10 000 Fair value $ 6 000 10 000 25 Fair value Land Machinery (net) Liabilities Carrying amount 45 000 100 000 20 000 50 000 110 000 20 000 Carrying amount Inventories Fittings (net) $ 5 000 10 000 Fair value $ 6 000 10 000 25 Fair value Land Machinery (net) Liabilities Carrying amount 45 000 100 000 20 000 50 000 110 000 20 000