E3.5 Acquisition analysis, including fair value adjustment for plant and equipment (Section 3.6.2) On 1 October 20XO, EF Ltd acquired all the issued ordinary shares of GH Ltd. The terms of the acquisition agreement specified that EF Ltd must pay the existing shareholders of GH Ltd $1.5million immediately and a further $1.5million on 30 September 20X1. The incremental cost of short-term finance to EF Ltd is 10% p.a. At acquisition date, the issued capital and reserves of GH Ltd were as follows: Issued capital 1 200000 Retained eamings 1/10/20X0 1400000 At 1 October 20xO, the plant and equipment of GH Ltd had a carrying amount that was $150000 less than its fair value. The company income tax rate is 30%. REQUIRED (a) Prepare the general journal entries for the accounting records of EF Ltd to record: (i) the investment in GH Ltd on 1 October 20X0 (ii) the cash payment of the $1500 000 on 30 September 20X1.
E3.5 Acquisition analysis, including fair value adjustment for plant and equipment (Section 3.6.2) On 1 October 20XO, EF Ltd acquired all the issued ordinary shares of GH Ltd. The terms of the acquisition agreement specified that EF Ltd must pay the existing shareholders of GH Ltd $1.5million immediately and a further $1.5million on 30 September 20X1. The incremental cost of short-term finance to EF Ltd is 10% p.a. At acquisition date, the issued capital and reserves of GH Ltd were as follows: Issued capital 1 200000 Retained eamings 1/10/20X0 1400000 At 1 October 20xO, the plant and equipment of GH Ltd had a carrying amount that was $150000 less than its fair value. The company income tax rate is 30%. REQUIRED (a) Prepare the general journal entries for the accounting records of EF Ltd to record: (i) the investment in GH Ltd on 1 October 20X0 (ii) the cash payment of the $1500 000 on 30 September 20X1.
Financial Accounting Intro Concepts Meth/Uses
14th Edition
ISBN:9781285595047
Author:Weil
Publisher:Weil
Chapter14: Intercorporate Investments In Common Stock
Section: Chapter Questions
Problem 16E
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Transcribed Image Text:E3.5 Acquisition analysis, including fair value adjustment for plant and equipment
(Section 3.6.2)
On 1 October 20XO, EF Ltd acquired all the issued ordinary shares of GH Ltd. The terms of
the acquisition agreement specified that EF Ltd must pay the existing shareholders of GH Ltd
$1.5million immediately and a further $1.5million on 30 September 20X1. The incremental
cost of short-term finance to EF Ltd is 10% p.a. At acquisition date, the issued capital and
reserves of GH Ltd were as follows:
Issued capital
1 200000
Retained eamings 1/10/20X0
1400000
At 1 October 20xO, the plant and equipment of GH Ltd had a carrying amount that was
$150000 less than its fair value. The company income tax rate is 30%.
REQUIRED
(a) Prepare the general journal entries for the accounting records of EF Ltd to record:
(i) the investment in GH Ltd on 1 October 20X0
(ii) the cash payment of the $1500 000 on 30 September 20X1.
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