1/07/2017

Chief Ltd acquired:

100%

of the issued shares of Sub Ltd for:

$2,460,000

At the date of acquisition, the shareholders equity of Sub Ltd consisted of:

Share capital

$1,107,000

General Reserve

$276,800

Retained earning

$207,540

Total Equity

$1,591,340

30/06/2020

the accounts of the two companies appear as follows:

Chief Ltd

Sub Ltd

$

$

Sales

3,936,000

1,983,000

Cost of Goods Sold

2,361,600

1,288,900

Depreciation expenses

196,800

99,100

Interest expenses

157,400

51,660

Other expenses

388,300

71,240

Other Income

Interest revenue

77,400

0

Dividend revenue

215,200

0

Income tax expense

337,300

141,600

Net Profit after Tax

787,200

330,500

Retained earnings (01/07/2019)

1,180,800

345,900

Available for appropriation

1,968,000

676,400

Interim dividend paid

184,500

92,200

Final dividend declared

307,500

123,000

Retained earnings (30/06/2020)

1,476,000

461,200

Share Capital

3,198,000

1,107,000

General reserve

246,000

276,800

Total Owner's Equity

4,920,000

1,845,000

Debentures (due 30/06/2022)

0

369,000

Dividend payable

307,500

123,000

Deferred Tax Liability

369,000

30,700

Other liabilities

553,500

92,300

Total Liabilities

1,230,000

615,000

Total Liabilities & Owner's Equity

6,150,000

2,460,000

Assets

Dividend receivable

123,000

0

Inventory

861,000

147,600

Non-current assets (depreciable)

1,660,500

984,000

Accumulated depreciation

-664,200

-196,800

Land

1,045,500

984,000

Investment in Sub Ltd

2,460,000

0

Debentures in Sub Ltd

369,000

0

Other assets

295,200

541,200

Total Assets

6,150,000

2,460,000

Additional information:

a) At date of acquisition, all identifiable net assets of Sub Ltd were recorded at fair value, with the exception of a block of land in the books of Sub Ltd.

The block of land had a carrying value of:

$984,000

and a fair value of:

$1,370,000

b) The directors apply the impairment test for goodwill annually.

30/06/2020

The directors have determined the goodwill should be completely written off.

The cumulative goodwill impairment write-downs for prior years totalled:

$478,000

1/07/2018

c) A non-current asset owned (Plant) by Chief Ltd was sold to Sub Ltd.

Cost of the asset was:

$440,000

Accumulated depreciation of the asset was:

$157,000

The asset was sold for:

$393,000

Sub Ltd estimated this item had a remaining useful life of:

4

years

and residual value of:

$0

d) The opening inventory of Chief Ltd includes unrealised profit of:

$258,000

on inventory transferred from Sub Ltd during the prior financial year.

30/06/2020

all of this inventory was sold by Chief Ltd to parties external to the Group.

e) During the current year, Chief Ltd purchased inventory from Sub Ltd for:

$1,119,000

This inventory had previously cost Sub Ltd:

$447,000

Percentage of this inventory sold to outsiders by Chief Ltd during the year was:

50%

f) Chief Ltd holds debentures in Sub Ltd amounting to:

$369,000

30/06/2020

Sub Ltd paid the annual interest in debentures at a rate of:

14%

g) Chief Ltd holds no investment in shares except for those held in Sub Ltd. Accordingly, examination of the dividend revenue and dividend receivable accounts in Chief Ltds financial statements indicates that Chief Ltd has recognised dividend revenue prior to receipt.

h) The tax rate is:

30%

CONSOLIDATED JOURNAL ENTRIES:
	Acqusition Information
	Ownership		100%
	Acquirer:		Chief Ltd
	Acquiree:		Sub Ltd
	Acqusition Date:		1/07/2017
	Consolidation Date:		30/06/2020
	Years since acqusition		3
	Tax Rate		30%
	Consolidation Date Information
	Share Capital of Sub Ltd on Date of Acquisition		$1,107,000
	Revaluation Reserve of Sub Ltd on Date of Acquisition		$0
	General Reserve of Sub Ltd on Date of Acquisition		$276,800
	Retained Earnings of Sub Ltd on Date of Acquisition		$207,540
	Dividend Declared by Sub Ltd		$123,000
	Dividend Paid by Sub Ltd		$92,200
	Total goodwill written off for prior years		$478,000

I can't include everything on one post - its not letting me. please advise how else I can send the full question. I have also posted the other figures separately as another question

*** all figures are included please scroll tp the right to see figures