Question 3: Prepare acquisition analysis and Consolidation worksheet entries
Question 3: Prepare acquisition analysis and Consolidation worksheet entries
Syd Ltd acquired all the issued shares (Cum-div.) of Mel Ltd on 1 July 2020. At this date the financial position of Matt Ltd was as follows:
|
|
Carrying Amount |
Fair Value |
|
Plant |
$300 000 |
270 000 |
|
|
(60 000) |
|
|
Account Receivables |
35 200 |
35 200 |
|
Cash |
15 000 |
15 000 |
|
Inventories |
15 600 |
19 600 |
|
|
305 800 |
|
|
|
|
|
|
Share Capital |
230 000 |
|
|
General Reserve |
23 400 |
|
|
|
24 200 |
|
|
Provisions of Employee benefits |
19 200 |
19 200 |
|
Dividend Payable |
9 000 |
9 000 |
|
|
305 800 |
|
|
|
|
|
Additional information:
The assets of Mel Ltd did not include a patent that was valued by Syd Ltd at $12 000. Its useful life was considered to be 6 years, with benefits being received equally over that period.
The plant was considered to have a further 10-year life and is
All the pre-acquisition inventories were not sold by 30 June 2021.
An interim dividend of $10,000 paid by Mel Ltd in September 2020.
Syd Ltd declared a final dividend of $20 000 in June 2020.
In exchange for the shares in Mel Ltd, Syd Ltd gave the following consideration:
- 80 000 shares in Robert Ltd, each share having a fair value of $2.50 per share
- cash of $45 000
- Artwork having a fair value of $35 000.
Syd Ltd incurred legal and accounting costs of $4 500 and share issue costs of $3 000.
The tax rate is 30%.
Required:
- Prepare Acquisition Analysis at 1 July 2020.
- Prepare the consolidation worksheet entries for consolidated financial statements prepared by Syd Ltd at 30 June 2021.
- Prepare the acquisition analysis at 1 July 2020 assuming Syd Ltd acquired the issued share of Mel Ltd on Ex-div basis.
Answer:
At 1 July 2020:
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