SECTION A (Practical Question 30 marks)

Question 1 Partial Goodwill Method

Green Ltd acquired 90% of the shares (ex div.) of Yellow Ltd on 1 July 2018 for

$250 000. At this date, the equity of Yellow Ltd consisted of:

Share capital

$ 140 000

General Reserve

25 000

Retained earnings

70 000

At acquisition date all the identifiable assets and liabilities of Yellow Ltd were recorded at amounts equal to fair value except the following:

Inventory

Carrying Amount : 30 000

Fair value :45 000

Patent

Carrying Amount : 85 000

Fair Value: 90 000

Plant(cost 100 000)

Carrying Amount : 80 000

Fair Value : 90 000

Plant was depreciated at 10% using straight line method. Patent has definite life and existing goodwill of $5000 was recorded.

At 30 June 2019, the equity of Yellow Ltd consisted of:

Share capital

$ 140 000

General Reserve

40 000

Retained earnings

90 000

During the 2019-20 year Yellow Ltd recorded a profit of $30 000.

Required

Prepare the consolidated worksheet entries at 30 June 2020 for Green Ltd assuming:

Green Ltd adopts the partial goodwill method:

(1) Calculate Acquisition Analysis?

(2) Generate all consolidation journal entries for 30/6/2020