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 Retained earnings General ReserveTotal equity

$

170,000 30,500 4,800205,300

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

Inventories

Plant (cost $400,000)

Carrying amount ($)

5,000 200,000

Fair Value ($)

8,000 210,000

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 straight- line basis. All inventory was sold by 30 June 2020.

Assume 30% tax rate Required:

1. (a)Prepare the acquisition analysis at 1 July 2019. (6 marks)
2. (b)Prepare the consolidation entries at acquisition date, 1 July 2019.Include narrations
3. for each entry.(15 marks)
4. (c)Prepare the consolidation worksheet as at 1 July 2019. (13 marks)
5. (d)Prepare Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in
6. narrative format. (6 marks)

Question 1 (c) (13 marks) Consolidation worksheet answer: Financial statements John Ltd Wayne Ltd Adjustments Group Debit Credit Share capital 200,000 170,000 Retained earnings 50,000 30,500 General Reserve 0 4,800 BCVR 0 0 Total Equity 250,000 205,300 Current Assets Inventory 30,000 5,000 Other assets 0 41,300 Non-current Assets Plant (at cost) 45000 400,000 Accumulated depreciation -25,000 -200,000 Goodwill 0 5,000 Investment in Kelly Ltd 250,000 Total Assets 300,000 251,300 Current Liabilities Deferred Tax liability 50,000 0 Debenture 0 46,000 Net Assets 250,000 205,300Part A Question 1 (40 marks) 0n 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: 5 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 (5) Fair Value (5) 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 straight- line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: (3) 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 a Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in narrative format. (6 marks)