Question 1: (18 marks)

Supreme Ltd made a takeover bid for all the issued voting shares of Mighty Ltd offering 2 Supreme Ltd shares for every 3 Mighty Ltd shares. The offer from Supreme Ltd was accepted by 70% of the shareholders of Mighty Ltd.

At acquisition date, which was deemed to be 1 July 2013, the following information is available:

Mighty Ltd at 30 June 2013

Share Capital (750 000 shares) Retained Profits

Capital Reserve

Total Equity

Market value of each company's shares at 1 July 2013

Supreme Ltd Mighty Ltd

$000

750

600 1 200 2 550

$6.20 $3.50

In Mighty Ltd's accounting records, land was stated at $300 000 below its cost to the economic entity (i.e. fair value at acquisition date). This is to be accounted for as a consolidation adjustment. The rate of company income tax is 30%.

Required: [use the space provided below]

(i) Complete the acquisition analysis on 1 July 2013 for Supreme Ltds investment in Mighty Ltd as required by AASB 3 and determine the amount of goodwill or gain on bargain purchase following the fair value method of goodwill. (5 marks)

(ii) Prepare the acquisition journal entries as required by AASB 10 at 1 July 2013. (13 marks)

AFM311, Trimester 1 2014

Question 1: (18 marks) Supreme Ltd made a takeover bid for all the issued voting shares of Mighty Ltd offiering 2 Supreme Ltd shares for every 3 Mighty Ltd shares. The offer from Supreme Ltd was accepted by 70% of the shareholders of Mighty Ltd. At acquisition date, which was deemed to be 1 July 2013, the fou ng information is available: Mighty Ltd at 30 June 2013 Share Capital (750 000 shares) Retained Profits $000 750 600 Capital Reserve Total Equity 2 550 Market value of each company's shares at 1 July 2013 Supreme Ltd Mighty Ltd $6.20 $3.50 In Mighty Ltd's accounting records, land was stated at $300 000 below its cost to the economic entity (i.e. fair value at acquisition date). This is to be accounted for as a consolidation adjustment. The rate ofcompany income tax is 30%. Required: use the space provided below] (i) Complete the acquisition analysis on 1 July 2013 for Supreme Ltd's investment in Mighty Ltd as required by AASB 3 and determine the amount of goodwill or gain on bargain purchase following the fair value method of goodwill. (5 marks) (ii) Prepare the acquisition journal entries as required by AASB 10 at 1 July 2013. (13 marks)