Consolidation: wholly owned subsidiaries

When Scorpio Ltd acquired all the issued shares (cum div) of Graham Ltd for $273 000 on 1 January 2020, one of the assets in the statement of financial position of Graham Ltd was $15 000 goodwill, which had been recognised by Graham Ltd upon its acquisition of a business from Max Ltd. At that date the equity of Leslie Ltd was recorded at:

Share capital	$150 000
Reserves	40 000
Retained earnings	60 000

Further Leslie Ltd had a dividend payable liability of $10 000, the dividend to be paid in March 2020. All other assets and liabilities were carried at amounts equal to their fair values.

Having prepared the acquisition analysis as part of the process of preparing the consolidated financial statements for Scorpio Ltd, the group accountant, Peterson, has asked for your opinion.

Required Questions:

Provide advice on the following issues:

1. Undertake the acquisition analysis and calculate the goodwill. (8 marks)

2. Prepare the consolidation worksheet entries on 1 January 2020, immediately after combination. (10 marks)

3. How does the recording of goodwill by the subsidiary affect the accounting for the groups goodwill?