Question: Hi Please can you answe the below question Question: Case Study: Calculation High Sky Ltd acquired 100% of the issued share capital of Low Land
Hi
Please can you answe the below question
Question: Case Study: Calculation
High Sky Ltd acquired 100% of the issued share capital of Low Land Ltd on 30 June 2019 for a cash consideration of $1,000,000. At that time the assets and liabilities of High Sky Ltd and Low Land Ltd were represented as follows:
High Sky Limited
Low Land Ltd
Cash in bank
150,000
50,000
Deferred Tax Asset
0
0
Land
0
180,000
Furniture
0
20,000
Accumulated depreciation - furniture
0
(10,000)
Equipment
0
50,000
Accumulated depreciation - equipment
0
(10,000)
Building
0
200,000
Accumulated Depreciation - buildings
0
(80,000)
Investment in Low Land Ltd
500,000
0
Goodwill
0
0
Total Assets
650,000
400,000
Loan
0
70,000
Creditors
20,000
0
Deferred Tax Liability
0
0
Provision for legal claim
0
0
Share capital
500,000
300,000
Retained earnings
130,000
30,000
BCVR
0
0
Total Liabilities and Equity
650,000
400,000
When High Sky Limited acquired its investment in Low Land Ltd, the following information applied:
A.Land held by Low Land Ltd was undervalued by $12,000
B.Furniture held by Low Land Ltd was overvalued by $2,000. The furniture had originally cost $20,000 10 years ago and was being depreciated at 5% per year.
C.Equipment held by Low Land was undervalued by $4,000. The equipment had originally cost $50,000 2 years ago and was being depreciated at 10% per year.
D.A building held by Low Land Ltd was undervalued by $50,000. The building had originally cost $200,000 5 years ago and was being depreciated at 8% per year.
E.A contingent liability relating to an unsettled legal claim with a fair value of $10,000 was recorded in the notes to Low Land Ltd's financial statements
F.The tax rate is 30%
Required
1.Calculate the amount of goodwill/ (bargain purchase) acquired on acquisition. (2 Marks)
2.Prepare the necessary journal entries to account for the business combination valuation reserve adjustments at acquisition date. (3 marks)
3.Prepare the consolidated worksheet using the following columns (5 Marks)
Assets/ Liabilities/ Equity
High Sky Limited
Low Land Ltd
Adjustments
Group
DR
CR
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