Question
Gold Ltd acquired 100 per cent of the issued capital of Silver Ltd on 30 June 2021 for $1 300 000, when the statement of
Gold Ltd acquired 100 per cent of the issued capital of Silver Ltd on 30 June 2021 for $1 300 000, when the statement of financial position of Silver Ltd was as follows:
Statement of financial position of Silver Ltd as at 30 June 2021
$000
$000
Assets
Liabilities
Accounts receivable
50
Accounts Payable
80
Inventory
80
Loan
200
Land
400
Shareholders equity
Property, plant and equip.
1 000
Share capital
600
Accumulated depreciation
(250)
Retained earnings
400
1 280
1 280
Additional information
The tax rate is 30 per cent. As at the date of acquisition, all assets of Silver Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $950 000. Silver Ltd adopts the cost model for measuring its property, plant and equipment. In the books of Riversdale, the property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value. One year following acquisition it was considered that Silver Ltds goodwill had a recoverable amount of $100 000. The statements of financial position and details of opening and closing retained earnings of Gold Ltd and Silver Ltd one year after acquisition are as follows: Statements of financial position of Gold Ltd and Silver Ltd as at 30 June 2022
Gold Ltd ($000)
Silver Ltd ($000)
Assets
Cash
65
50
Accounts receivable
75
100
Dividends receivable
90
Inventory
170
150
Land
600
400
Property, plant and equipment
1,000
1,000
Accumulated depreciation
(300)
(300)
Investment in Silver Ltd
1 300
Total assets
3 000
1 400
Liabilities
Accounts payable
140
30
Dividends payable
150
90
Loan
710
150
Shareholders equity
Share capital
1 250
600
Retained earnings
750
530
Total Liabilities and Shareholders Equity
3 000
1 400
Reconciliation of opening and closing retained earnings
Profit after tax
400
190
Retained earnings30 June 2021
300
200
Interim dividend
(90)
(40)
Final dividend
(110)
(50)
Retained earnings30 June 2022
500
300
Required
Prepare the consolidation journal entries necessary to consolidate Gold Ltd and Silver Ltd at 30 June 2022. (8 marks) Prepare the consolidated worksheet of Gold Ltd and Silver Ltd at 30 June 2022. (10 marks)
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Managerial Accounting
Authors: Ray Garrison, Eric Noreen, Peter Brewer
15th edition
1259404781, 007802563X, 978-1259404788, 9780078025631, 978-0077522940
