Question
ACCT2201 GROUP CASE STUDY On 1 July 2013 Mario Limited acquired all of the share capital of Luigi Limited for a consideration of $500,000 cash.
ACCT2201 GROUP CASE STUDY
On 1 July 2013 Mario Limited acquired all of the share capital of Luigi Limited for
a consideration of $500,000 cash.
At the date of acquisition the equity of Luigi Ltd consisted of:
At that date all the identifiable assets and liabilities were recorded at fair value with the exception o
For the net assets at acquisition:
The inventory was all sold by 30/6/14.
The accounts receivable were collected by 30/6/14 for $21,000.
The land was sold on 30/12/16 for $45,000.
The remaining useful life of the plant is 7 years. The plant was on hand still at 30/6/17.
Information from the trial balances of Mario Ltd and Luigi Ltd at 30 June 2017 is presented overleaf.
Additional Information
1. On 1 Jan 2017 Luigi Ltd sold inventory to Mario Ltd costing $27,000 for $38,000. One quarter of this inventory was still on hand as at 30/6/17.
2. On 1 Jan 2016 Luigi Ltd sold inventory costing $4700 to Mario Ltd for $8000. Mario Ltd
treats the item as equipment and depreciates it at 10% per annum.
3.On 1 July 2016 Luigi sold plant to Mario for $7,000. The plant had cost Luigi $8,000 on
1 July 2014 and it was being depreciated at 10% per annum. Mario regards the plant as inventory. The inventory was all sold by 30th July 2016.
4. At 1 July 2016 Luigi Ltd held inventory that it had purchased from Mario Ltd on 1 June
2016 at a profit of $8000. All inventory was sold by 30 June 2017
5. Mario Ltd accrues dividends from Luigi Ltd once they are declared.
6. Mario Ltd has earned $1200 in interest revenue in the 2017 financial year from Luigi Ltd. 7. Mario Ltd has earned $2400 in service revenue in the 2017 financial year from Luigi Ltd. 8. Assume a tax rate of 30%.
Required:
A. Prepare the acquisition analysis at 1 July 2013.
B. Prepare the BCVR and preacquisition journal entries at 1 July 2013.
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