Question 1 (40 marks)

On 1 July 2019, John Ltd acquired all the issued shares of Wayne Ltd for $250,000. At this

date, the financial statements of Wayne Ltd showed the following:

$

Share capital 170,000

Retained earnings 30,500

General Reserve 4,800

Total equity 205,300

At acquisition date, all the net identifiable assets and liabilities in Wayne Ltd were recorded

at amounts equal to their fair value except for:

Asset Carrying amount ($)Fair Value ($)

Inventories 5,000 8,000

Plant (cost $400,000) 200,000 210,000

The records also showed that the company had recorded existing goodwill of $5,000.

The Plant was calculated to have a further life of 5 years, and was depreciated on a straightline basis. All inventory was sold by 30 June 2020.

Assume 30% tax rate

Required:

(a) Prepare the acquisition analysis at 1 July 2019. (6 marks)

(b) Prepare the consolidation entries at acquisition date, 1 July 2019. Include narrations

for each entry. (15 marks)

(c) Prepare the consolidation worksheet as at 1 July 2019. (13 marks)

(d) Prepare Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in

narrative format. (6 marks)