Answer To: OZFORD INSTITUTE OF HIGHER EDUCATION DEPARTMENT OF HIGHER EDUCATION TRIMESTER 2 2020 ACC3100...
Yash answered on Oct 18 2021
Solution:
1. Acquisition analysis at 1 July 2019:
Fair value of the identifiable assets & liabilities of M/s. Linda Ltd. acquired is $ 270,000. However, the consideration paid for the same is $ 2,72,000. Hence, $ 2,000 had been paid extra for the acquisition which will be treated as Goodwill in the consolidated financials.
Computation of Goodwill:
Particulars
Amount
Consideration paid for the acquisition
$ 272,000
Less: Fair value of net assets acquired
$ 270,000*
Value of Goodwill
$ 2,000
*Computation of Fair value of net assets acquired
Particulars
Amount
Share Capital
$ 150,000
General Reserve
$ 40,000
Retained Earnings
$ 80,000
Total
$ 270,000
Note:
Treatment of Goodwill as envisaged in the AASB 3, Business Combinations - August 2015 were as follows:
i.) The acquirer shall recognise goodwill as of the acquisition date measured as the excess of (a) over (b) below:
(a) the aggregate of:
(i) the consideration transferred measured in accordance with this Standard, which generally requires acquisition-date fair value (see paragraph 37);
(ii) the amount of any non-controlling interest in the acquiree measured in accordance with this Standard; and
(iii) in a business combination achieved in stages (see paragraphs 41 and 42), the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree.
(b) the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this Standard.
ii.) Further, In a business combination in which the acquirer and the acquiree (or its former owners) exchange only equity interests, the acquisition-date fair value of the acquiree’s equity interests may be more reliably measurable than the acquisition-date fair value of the acquirer’s equity interests. If so, the acquirer shall determine the amount of goodwill by using the acquisition-date fair value of the acquiree’s equity interests instead of the acquisition-date fair value of the equity interests transferred. To determine the amount of goodwill in a business combination in which no consideration is transferred, the acquirer shall use the acquisition-date fair value of the acquirer’s interest in the acquiree in place of the acquisition-date fair value of the consideration transferred (paragraph 32(a)(i)). Paragraphs B46–B49 provide related application guidance.
Hence, we had made the adjustment as per the requirement of AASB 3.
2.) Journal Entries for consolidation:
Plant---------------------------------Dr. $ 8,20,000 -
Fixtures----------------------------- Dr. $ 1,20,000 -
Land----------------------------------Dr. $ 1,40,000 -
Brands--------------------------------Dr. $ 30,000 -
Goodwill of Linda Ltd. --------------Dr. $ 10,000 -
Inventories-------------------------- Dr. $ 40,000 -
Cash-----------------------------------Dr. $ 7,000 -
Receivables ----------------------------Dr. $ 13,000 -
Goodwill----------------------------------Dr. $ 2,000 -
To Accumulated Depreciation - $ 7,30,000
To Investment in Linda - $ 2,72,000
To Provisions - $ 20,000
To Payables - $ 25,000
To Long Term Loans - $ 1,10,000
To Retained Earnings - $ 25,000
(Being consolidation Entries recorded)
Note: Discussion & Analysis for this journal entry had given along with solution 3 below.
3.) Consolidated Financial Statement as at 30.06.2020
Basil Ltd
Linda Ltd
Adjustment
Remarks
Consolidated Value as at 30.06.2020
RETAINED EARNINGS (30/6/2020)
$ 1,25,000.00
$ 1,15,000.00
$ -90,000.00
Note b
$ 1,50,000.00
Share Capital
$ 7,00,000.00
$ 1,50,000.00
$ -1,50,000.00
Note c
$ 7,00,000.00
General Reserve
$ 92,000.00
$ 30,000.00
$ -30,000.00
Note d
$ 92,000.00
TOTAL EQUITY
$ 9,17,000.00
$ 2,95,000.00
$ -2,70,000.00
$ 9,42,000.00
Provisions
$ 30,000.00
$ 20,000.00
$ 50,000.00
Payables
$ 15,000.00
$...