Lanark Ltd is a stationary retail business in the Melbourne market. Recently, Lanark Ltd expand the market
Question:
Lanark Ltd is a stationary retail business in the Melbourne market. Recently, Lanark Ltd expand the market to the office equipment market and decided to take over Shibuca Ltd, of medium size business specializing in renting office equipment.
The acquisition consisted of Lanark Ltd acquiring 100% of Shibuca Ltd shares for a consideration of $600,000 on 1 July 2021.
At that date the statement of financial position of Shibuca Ltd is as follows:
Statement of financial position 1 July 2021 | |||
Cash | 15,000 | Loans | 300,000 |
Account receivables | 45,000 | Account payables | 20,000 |
Inventory | 90,000 | ||
Buildings | 405,000 | Share Capital | 300,000 |
Plant | 150,000 | Retained Earnings | 85,000 |
Moreover, you have this additional information on the company:
- Shibuca Ltd has internally generated its brand name “Shibuca” whose fair value is estimated to be $50,000;
- All the assets and liabilities of Shibuca Ltd are fairly valued at the date of the acquisition.
REQUIRED
- Explain whether there are non-controlling interests in Shibuca Ltd.
- Identify if any goodwill arises from the acquisition and calculate (if any) its amount.
- Considering that no intra-group transactions occurred between Lanark Ltd and Shibuca Ltd in the financial year, provide the journal entries for the elimination of the investment in the subsidiary to prepare the consolidated financial statement on 30 June 2022.
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon