On 1 July 2014 Padma Ltd acquires 25 per cent of the issued capital of Jamuna Ltd for a cash consideration of $360 000. At the date of acquisition, the shareholders’ equity of Jamuna Ltd is: Share capital $450 000 Retained earnings $300 000 Total shareholders’ equity 750 000 Additional information On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 Assume a tax rate of 30% is assumed Required Apply equity method of accounting to: Calculate the amount of goodwill at the date of acquisition Prepare the journal entries for the year ending 30 June 2015 Prepare the journal entries for the year ending 30 June 2016
On 1 July 2014 Padma Ltd acquires 25 per cent of the issued capital of Jamuna Ltd for a cash consideration of $360 000. At the date of acquisition, the shareholders’ equity of Jamuna Ltd is: Share capital $450 000 Retained earnings $300 000 Total shareholders’ equity 750 000 Additional information On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 Assume a tax rate of 30% is assumed Required Apply equity method of accounting to: Calculate the amount of goodwill at the date of acquisition Prepare the journal entries for the year ending 30 June 2015 Prepare the journal entries for the year ending 30 June 2016
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
Problem 19E
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Question
On 1 July 2014 Padma Ltd acquires 25 per cent of the issued capital of Jamuna Ltd for a cash consideration of $360 000.
At the date of acquisition, the shareholders’ equity of Jamuna Ltd is:
Share capital |
$450 000 |
|
$300 000 |
Total shareholders’ equity |
750 000 |
Additional information
- On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July
- For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30
- For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150
- Assume a tax rate of 30% is assumed
Required
Apply equity method of accounting to:
- Calculate the amount of
goodwill at the date of acquisition - Prepare the
journal entries for the year ending 30 June 2015 - Prepare the journal entries for the year ending 30 June 2016
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