On 1 July 2018, Bor Ltd acquired 75% of the issued shares of Deaux Ltd for $3,750,000 cash and the transfer of a patent which had a fair value of $700,000.

The separate accounting records of Deaux Ltd at 1 July 2018 include the following balances: Contributed equity of $4,000,000 and Retained earnings of $1,200,000. At the date of acquisition, all assets of Deaux Ltd were recorded at fair value except for land which had a carrying amount of $264,000. The land had a fair value of $784,000. A contingent liability relating to an unsettled legal claim with a fair value of $300,000 was recorded in the notes of Deaux Ltd’s financial statements. The tax rate is 30%.

Required

Prepare the acquisition analysis as at acquisition date.

State the amount that would be disclosed in the consolidated financial statements at 30 June 2020 for Investment in Deaux Ltd and explain why.

Based on the information provided, show the journal entries, including all related tax effects, required upon consolidation as at 30 June 2020. The legal claim has not been settled and the land has not been sold. There are no inter-entity transactions.

Answer rating: 100% (QA)

1 Acquisition analysis as at acquisition date Consideration transferred 3750000 Fair value of assets ... View the full answer