Q1. Acquisition analysis for Tuna Ltd at 1 July 2015
=66000 + 6000 (equity) + 4500 (1 – 30%) (Inventory)+ 3000 (1 – 30%) (Plant)+ 15000 (1 – 30%) (Patents)
= 87750
Therefore, net fair value of Brim Ltd is $87,750
Goodwill = $90,000-$87,750=$2250
Q2. Consolidation journal entries for Tuna Ltd at 1 July 2015
- Combined Business
Debit Credit
Accumulated depreciation 30,000
Plant 27,000
Deferred tax liability 900
Business combination valuation reserve 2,100
Depreciation expense 600
Retained earnings 600
Accumulated depreciation 1,200
Deferred tax liability 360
Income tax expense 180
Retained earnings 180
Goodwill 2,250
Business combination valuation reserve 2,250
2 Entries – Pre-acquisition
Debit Credit
Retained earnings 6,000
Share capital 66,000
Business combination valuation reserve 18,000
Shares in Brim Ltd 90 000
Retained earnings (1/7/16)
(6000 + 3150 + 10500) 19,650
Share capital 66,000
Business combination valuation reserve 4,350
Shares in Brim Ltd 90,000
- Sales and profit in closing inventory
Debit Credit
Sales revenue 21,000
Cost of sales 21,000
Sales revenue 4,500
Cost of sales 4,200
Inventory 300
Deferred tax asset 90
Income tax expense 90
- Profit in opening inventory of Brim Ltd
Debit Credit
Retained earnings 420
Income tax expense 180
Cost of sales 600
- Current period Sale of Plant
Debit Credit
Proceeds on sale of plant 15,000
Carrying amount of plant sold 14,000
Plant 1,000
Deferred tax asset 300
Income tax expense 300
Accumulated depreciation 100
Depreciation expense 100
(0.1*1000)
Income tax expense 30
Deferred tax asset 30
- Prior period -Sale of Inventory (Plant ):
Debit Credit
Retained earnings (1/7/16) 1,400
Deferred tax asset 600
Plant 2,000
Accumulated depreciation 1000
Depreciation expense 400
Retained earnings (1/7/16) 600
(0.2*2000)
Income tax expense 120
Retained earnings (1/7/16) 180
Deferred tax asset 300
- Current period – Sale of Plant (Inventory)
Debit Credit
Proceeds on sale of plant 9 000
Cost of sales 1 500
Carrying amount of plant sold 7 500
Q3. Consolidated set of financial statements for the group
|
Tuna Ltd |
Brim Ltd |
Journal number |
Adjustments |
Group |
||
|
DR |
CR |
|||||
|
Sales revenue |
64 500 |
78 000 |
3 |
21,000 4,500 |
117,000 |
|
|
Cost of sales |
30 900 |
46 350 |
3 3 4 7 |
21,000 4,200 600 1,500 |
49,950 |
|
|
Gross profit |
33 600 |
31 650 |
67,050 |
|||
|
Trading expenses |
4 800 |
9 000 |
13,800 |
|||
|
Office expenses |
7 950 |
4 050 |
12,000 |
|||
|
Depreciation |
1 800 |
3 900 |
1,5 6 |
600 |
100 400 |
5,800 |
|
14 550 |
16 950 |
31,600 |
||||
|
Profit from trading |
19 050 |
14 700 |
35,450 |
|||
|
Proceeds from sale of plant |
9 000 |
15 000 |
5 7 |
15,000 9,000 |
– |
|
|
Carrying amount of plant sold |
7 500 |
14 000 |
5 7 |
14,000 7,500 |
– |
|
|
Gain/loss on sale of machinery |
1 500 |
1 000 |
||||
|
Profit before tax |
20 550 |
15 700 |
35,450 |
|||
|
Tax expense |
11 100 |
7 300 |
4,1 5,3 6,5 |
180 30 120 |
180 90 300 |
18,160 |
|
Profit |
9 450 |
8 400 |
17,290 |
|||
|
Retained earnings (1/7/16) |
48 000 |
31 500 |
1,1 2,6 4 6 6 |
600 19,650 420 1,400 60 |
180 200 |
57,750 |
|
Retained earnings (30/6/17) |
57 450 |
39 900 |
75,040 |
|||
|
Share capital |
96 000 |
66 000 |
2 |
66,000 |
96,000 |
|
|
BCVR |
— |
— |
2,1 1 |
4,350 |
2,100 2,250 |
0 |
|
Total equity |
153 450 |
105 900 |
171,140 |
|||
|
Current liabilities |
21 100 |
10 500 |
31,600 |
|||
|
Deferred tax liability |
11 000 |
15 000 |
1 |
360 |
900 |
26,540 |
|
Total liabilities |
32 100 |
25 500 |
58,140 |
|||
|
Total equity and liabilities |
185 550 |
131 400 |
229,180 |
|||
|
DR |
CR |
|||||
|
Plant |
57 000 |
107 250 |
1 6 5 |
27,000 2,000 1,000 |
134,250 |
|
|
Accumulated depreciation |
(18 300) |
(33 450) |
1,1 6 5 |
30,000 600 100 |
1,200 |
(22,250) |
|
Intangibles |
12 000 |
11 100 |
23,100 |
|||
|
Shares in Brim Ltd |
90 000 |
– |
90,000 |
0 |
||
|
Deferred tax asset |
8 100 |
9 450 |
3 5 6 |
90 300 600 |
30 180 |
18,330 |
|
Inventory |
28 500 |
24 600 |
3 |
300 |
52,800 |
|
|
Receivables |
8 250 |
12 450 |
20,700 |
|||
|
Goodwill |
0 |
0 |
1 |
2,250 |
2,250 |
|
|
Total assets |
185 550 |
131 400 |
177,210 |
177,210 |
229,180 |
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