Savannah Inc. is a rapidly growing company known for its smart business decisions and ongoing expansion....

   

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Savannah Inc. is a rapidly growing company known for its smart business decisions and ongoing expansion. They have become dynamic and forward-thinking over time, looking for opportunities to grow and diversify. Their journey began with a significant step: acquiring Amelia Inc., their first subsidiary. This paved the way for more acquisitions and growth. However, here is the challenge: Savannah's accounting team does not have any experience in preparing for consolidated financial statements. In light of this, Savannah's CEO, John Smith, is seeking your professional assistance. He knows that preparing consolidated financial statements, which means combining financial statements from Savannah Inc. and Amelia Inc., is a complex task. Your expertise and knowledge will play a crucial role in ensuring the successful consolidation of the financial statements of these two companies. To make this happen, Mr. Smith has asked the accounting team to share all relevant information with you for your review and guidance. The information for Savannah Inc. and Amelia Inc. on the acquisition date can be seen as follows. On the 1st of July 2022, Savannah Inc. underwent an acquisition process in which they acquired all the issued shares of Amelia Inc. The total consideration for this acquisition included $30,000 in cash and 20,000 shares in Savannah Ltd, valued at $3 per share on the acquisition date. At the time of this acquisition, the equity structure of Amelia Inc. was as follows: • Share Capital: Amelia Inc. had a total share capital of $66,000. • Retained Earnings: Amelia Inc. had retained earnings amounting to $6,000. As of 1 July 2022, all the identifiable assets and liabilities of Amelia Inc. were recorded at amounts equal to their fair values, with a few exceptions: Plant (cost $150 000) Patents Inventories Carrying amount $ 120 000 90 000 18 000 Fair value $ 123 000 105 000 22 500 Required: Part A: Explain to the CEO of Savannah how you are going to consolidate the financial statements of Savannah Inc. and Amelia Inc.. Part B: Perform an acquisition analysis on the acquisition date and explain to the CEO of Savannah the purpose of this analysis. Part C: Prepare consolidation worksheet entries on the acquisition date and explain to the CEO of Savannah the reasoning behind preparing these journal entries. Savannah Inc. is a rapidly growing company known for its smart business decisions and ongoing expansion. They have become dynamic and forward-thinking over time, looking for opportunities to grow and diversify. Their journey began with a significant step: acquiring Amelia Inc., their first subsidiary. This paved the way for more acquisitions and growth. However, here is the challenge: Savannah's accounting team does not have any experience in preparing for consolidated financial statements. In light of this, Savannah's CEO, John Smith, is seeking your professional assistance. He knows that preparing consolidated financial statements, which means combining financial statements from Savannah Inc. and Amelia Inc., is a complex task. Your expertise and knowledge will play a crucial role in ensuring the successful consolidation of the financial statements of these two companies. To make this happen, Mr. Smith has asked the accounting team to share all relevant information with you for your review and guidance. The information for Savannah Inc. and Amelia Inc. on the acquisition date can be seen as follows. On the 1st of July 2022, Savannah Inc. underwent an acquisition process in which they acquired all the issued shares of Amelia Inc. The total consideration for this acquisition included $30,000 in cash and 20,000 shares in Savannah Ltd, valued at $3 per share on the acquisition date. At the time of this acquisition, the equity structure of Amelia Inc. was as follows: • Share Capital: Amelia Inc. had a total share capital of $66,000. • Retained Earnings: Amelia Inc. had retained earnings amounting to $6,000. As of 1 July 2022, all the identifiable assets and liabilities of Amelia Inc. were recorded at amounts equal to their fair values, with a few exceptions: Plant (cost $150 000) Patents Inventories Carrying amount $ 120 000 90 000 18 000 Fair value $ 123 000 105 000 22 500 Required: Part A: Explain to the CEO of Savannah how you are going to consolidate the financial statements of Savannah Inc. and Amelia Inc.. Part B: Perform an acquisition analysis on the acquisition date and explain to the CEO of Savannah the purpose of this analysis. Part C: Prepare consolidation worksheet entries on the acquisition date and explain to the CEO of Savannah the reasoning behind preparing these journal entries.

Answer rating: 100% (QA)

Step 1 Prepare the Acquisition Analysis on July 1 2022 Calculate the Fair Value of Consideration Transferred Cash 30000 Fair value of Savannah Ltd sha... View the full answer