On 1 July 2017, Patience Ltd acquired all the issued shares of Silence Ltd for a

Question

On 1 July 2017, Patience Ltd acquired all the issued shares of Silence Ltd for a cash consideration of $1,000,000. At that date, the financial statements of Silence Ltd showed the following information.

Share capital $650000

Retained earnings $250000

general reserve $20000

All the assets and liabilities of Silence Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $50,000 below its fair value with a related accumulated depreciation of $80,000. Silence Ltd accounted for all its property, plant and equipment in its own books using the cost model. In addition, Patience Ltd identified at acquisition date a contingent liability related to a lawsuit where Silence Ltd was sued by a former supplier and attached a fair value of $40,000 to that liability. Required: 1. Prepare the acquisition analysis at 1 July 2017. 2. Prepare the consolidation worksheet entries for Patience Ltd’s group at 1 July 2017.

Explanation / Answer

Consolidation Journal Entries:-

Share Capital....Dr 650000

Retained Earnings.....Dr 250000

General Reserve.........Dr 20000

Goodwill..................Dr 80000

To Investment in Subsdiaries 1000000

To record the equipments at Fair value

Equipments............Dr 50000

To Revaluation Reserve 50000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.