QUESTION $4($P Ltd$,$ S Ltd and A Ltd$,$ acquisition of subsidiary and investment in associates

IFRS $3$ and IAS $28)$

QUESTION $4($Cont$\text{'}$d$)$

On Jul $1,2019,$ P Ltd$.$ acquired a $70\%$ equity stake in S Ltd$.$ for $$150,000$ and a $30\%$ equity

stake in A Ltd$.$ for $$30,000.$ At the time of these acquisitions, the assets and liabilities of $S$

and A were fairly valued, and the fair values of the equity of $S$ and A were $$180,000$ and

$$100,000$ respectively.

The preliminary individual income statements and balance sheets of P Ltd$.,$ S Ltd$.$ and A Ltd

for the year ended Jun $30,2020$ are shown on the worksheet on the next page.

Assume no tax, no dividends and no value impairment on goodwill.

Under applicable accounting standards, $P$ is required to adopt full consolidation for $S$ as a

subsidiary and equity method for $A$ as an associated company. Except for $S$ and $A,P$ has

no other subsidiary or associated company.

Assume that $P$ opts to value any non$-$controlling interest in the acquired companies based

on the fair value of the equity of S Ltd under IFRS $3.$

Required:

$($i$)$ Show the computation of the goodwill.

$($ii$)$ Prepare the journal entry that P Ltd$.$ should make in its books on Jun $30,2020$ under the

equity method of accounting for investments in associated companies.

$($iii$)$ Complete the worksheet with adjustments and consolidated numbers. You will

need to add necessary line items in the worksheet. Formal presentation of financial

statements is NOT required.

$($iv$)$ Alternatively, assume the value of $NCl$ is based on the fair value of identifiable net

assets of S Ltd$,$ re$-$compute the goodwill on consolidation