Question
Mel Ltd purchased all the net assets of Josh Ltd on the first day of the 30 June 2012 financial year end. The consideration paid
Mel Ltd purchased all the net assets of Josh Ltd on the first day of the 30 June 2012 financial year end. The consideration paid totalled $3.5 million. On that day Josh Ltd had the following balance details available:
Accounts receivable - $25,000, Equipment - $1,000,000, Buildings - $1,000,000, Land at cost - $1,000,000, Long term loan payable 30 June 2020 - $100,000, Accumulated depreciation - Equipment $275,000, Accumulated depreciation - Buildings $250,000, Revalued land on acquisition date amounted to $1,500,000, Share capital - $2,000,000.
a) List the assets and liabilities (with their totals) that will be included in the accountant's acquisition analysis and calculate the goodwill total.
b) At the end of the acquisition year, the CEO and CFO advised the accountant that the cash-generating unit had a recoverable amount of $2.4 million. What entry will the accountant prepare upon hearing this advice?
c) Assuming that the carrying amount of the net identifiable assets is $2.9 million. Goodwill was impaired during the first year of acquisition by $100,000 and at the end of the acquisition year, the cash-generating unit had a recoverable amount $3.1 million. Show the entry to account for goodwill at the end of the acquisition year.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started