On 1 July 2018, Aston Ltd, a parent entity, acquired 25% of the outstanding shares of...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
On 1 July 2018, Aston Ltd, a parent entity, acquired 25% of the outstanding shares of Brendon Ltd at a cost of $160,000, paid in cash. It was assessed that Aston Ltd had the power to exercise significant influence over the operating and financial policies of Brendon Ltd. At the date of acquisition, the shareholders' equity of Brendon Ltd consisted of share capital of $360,000, retained earnings of $123,000, and general reserve of $90,000. All the identifiable net assets of Brendon Ltd were recorded at fair value, except for inventory with a carrying amount of $50,000 and a fair value of $75,000. to search Additional information: 1. Brendon Ltd transferred $30,000 to the general reserve from retained earnings in May 2021. 2. At 30 June 2020, the closing inventory of Brendon Ltd included inventory sold to it by Aston Ltd at a profit of $11,000. The entire inventory was sold by 30 June 2021. 3. On 1 July 2018, Brendon Ltd sold machinery to Aston Ltd for $85,000. The machine had a remaining life of five years. The machine originally cost Brendon Ltd $120,000 and had accumulated depreciation at the date of sale of $70,000. 4. There was no evidence that the investment account had to be impaired. 5. At 30 June 2021, Brendon Ltd reported a profit of $109,000 and paid dividends of $40,000. 6. The retained earnings of Brendon Ltd was $186,000 on 30 June 2019 and $245,000 on 30 June 2020 7. The income tax rate was 30%. 0- Required: A. Calculate the amount of goodwill or bargain resulting from the acquisition. Show all your workings. (4 marks) B. Prepare all necessary equity accounting entries recorded by Aston Ltd on consolidation for its investment in Brendon Ltd for the financial year ended 30 June 2021. (22 marks) C. List two reasons for the use of equity accounting for investments in associates? (4 marks) On 1 July 2018, Aston Ltd, a parent entity, acquired 25% of the outstanding shares of Brendon Ltd at a cost of $160,000, paid in cash. It was assessed that Aston Ltd had the power to exercise significant influence over the operating and financial policies of Brendon Ltd. At the date of acquisition, the shareholders' equity of Brendon Ltd consisted of share capital of $360,000, retained earnings of $123,000, and general reserve of $90,000. All the identifiable net assets of Brendon Ltd were recorded at fair value, except for inventory with a carrying amount of $50,000 and a fair value of $75,000. to search Additional information: 1. Brendon Ltd transferred $30,000 to the general reserve from retained earnings in May 2021. 2. At 30 June 2020, the closing inventory of Brendon Ltd included inventory sold to it by Aston Ltd at a profit of $11,000. The entire inventory was sold by 30 June 2021. 3. On 1 July 2018, Brendon Ltd sold machinery to Aston Ltd for $85,000. The machine had a remaining life of five years. The machine originally cost Brendon Ltd $120,000 and had accumulated depreciation at the date of sale of $70,000. 4. There was no evidence that the investment account had to be impaired. 5. At 30 June 2021, Brendon Ltd reported a profit of $109,000 and paid dividends of $40,000. 6. The retained earnings of Brendon Ltd was $186,000 on 30 June 2019 and $245,000 on 30 June 2020 7. The income tax rate was 30%. 0- Required: A. Calculate the amount of goodwill or bargain resulting from the acquisition. Show all your workings. (4 marks) B. Prepare all necessary equity accounting entries recorded by Aston Ltd on consolidation for its investment in Brendon Ltd for the financial year ended 30 June 2021. (22 marks) C. List two reasons for the use of equity accounting for investments in associates? (4 marks)
Expert Answer:
Answer rating: 100% (QA)
A Goodwill or bargain resulting from acquisition Cost of inves... View the full answer
Posted Date:
Students also viewed these accounting questions
-
Parent Corp. purchased 100% of the outstanding shares of Subsidiary Corp. on January 1, 20X1, for $1,000,000. The Statement of Financial Position (SFP) of Subsidiary Corp. and the fair values of the...
-
Parent Corp. purchased 80% of the outstanding shares of Subsidiary Corp. on January 1, 20X1, for $800,000. The Statement of Financial Position (SFP) of Subsidiary Corp. and the fair values of the...
-
At the end of the day, the change machine at a laundrette contained at least $6.30 and at most $17.30 in nickels, dimes, and quarters. There were 2 fewer dimes than three times the number of nickels...
-
The following information is available for Dylan Inc., a company whose shares are traded on the Toronto Stock Exchange: Other information: 1. For all of the fiscal year 2020, $100,000 of 6%...
-
Frank, Cora, and Mitch are equal shareholders in Purple Corporation. The corporation's assets have a tax basis of $50,000 and a fair market value of $600,000. In the current year, Frank and Cora each...
-
What tests may be conducted for identifying application errors?
-
(a) Imagine holding a ball a certain height above the ground. If you let the ball go, it accelerates downward. An interaction between the ball and what other object causes this acceleration? Is this...
-
Davison Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned...
-
24. A water jet whose cross section area is a striker wall making an angle e with the normal and rebounds elastically. The velocity of water of density d is v. Force exerted on wall is :- 0 (1) 2avd...
-
Passion Company is trying to decide whether or not to acquire Desiree Inc. The following balance sheet for Desiree Inc. provides information about book values. Estimated market values are also...
-
Find the minimum variance portfolio with expected rate of return of 8% using 5 assets with expected rates of return = [0.10,0.12, 0.05, 0.03, 0.15] , standard deviation = = [0.4, 0.45, 0.15,0.1,...
-
1. Cover Page: Use a textbox to specify the title of your report, your name, and the date. 2. Executive Summary: Summarize the purpose of the analysis, the content of your worksheets, and your nal...
-
The Doral company manufactures and sells pens. 5,600,000 units are sold per year at $0.50 per unit. Fixed costs are $870,000 per year. Variable costs = $0.30 per unit. 1. What is the current...
-
Occupancy for a hospital The Valley Hospital measures the in-patient occupancy of the hospital by determining the number of patient days divided by the number of available bed days in the hospital...
-
Each seed of the cotton plant has over 10,000 hair-like fibers that are about 3 cm long. These fibers help the seed get dispersed by the wind. If a seed is launched by the wind at 5 m/s , and it...
-
On July 8, Jones Inc. issued an $76,400, 7%, 120-day note payable to Miller Company. Assume that the fiscal year of Jones ends on July 31. Using the 360-day year, what is the amount of interest...
-
Show the minimum cost path from node A to node E in the following digraph G. A 2 C 5 3 B 24 2 D 1 E
-
In Problem 8.43, determine the smallest value of for which the rod will not fall out of the pipe. IA -3 in.-
-
Diehl Cleaners has the following statement of financial position items. Instructions Classify each item as an asset, liability, or equity. Analyze the effect of transactions. Accounts payable Cash...
-
Erin Danielle, the bookkeeper for Liverpool Ltd., has been trying to determine the correct statement of financial position for the company. The companys statement of financial position is shown...
-
Which of the following is true? a. Financial frauds have not occurred in U.S. companies because GAAP has detailed accounting and disclosure requirements. b. Transaction analysis is basically the same...
Study smarter with the SolutionInn App