Question
On 1 July 2012 Sarah Ltd acquires all the shares in Jane Ltd for $594,000 cash The financial statements of Jane Ltd as at 1
On 1 July 2012 Sarah Ltd acquires all the shares in Jane Ltd for $594,000 cash
The financial statements of Jane Ltd as at 1 July 2012 shows the following:
Retained earnings 171,000
Share capital 214,000
The tax rate is 30%
At the date of acquisition all the net assets of Jane Ltd are at fair value except for the following:
|
| Carrying amount | Fair value |
| Equipment (cost $241,000) | $145,000 | $215,000 |
The equipment has a further 19 years of useful life.
All consolidation entries on 30 June 2020 are shown below:
| Dr. Retained earnings | $171,000 |
|
| Dr. Share capital | $214,000 |
|
| Dr. BCVR |
|
|
| Dr. Goodwill |
|
|
| Cr. Investment in Jane Ltd |
| $594,000 |
| Dr. Accumulated depreciation | 241,000 145,000 |
|
| Dr.(or Cr.) Equipment |
|
|
| Cr. BCVR |
| ( 215,000 145,000 ) x 70% |
| Cr. DTL |
| ( 215,000 145,000 ) x 30% |
| Dr. Retained earnings | xxx |
|
| Dr. Depreciation expense | ( 215,000 145,000 ) / 19 |
|
| Cr. Accumulated depreciation |
|
|
| Dr. DTL |
|
|
| Cr. Income tax expense |
| ( 215,000 145,000 ) x 30% / 19 |
| Cr. Retained earnings |
|
|
Complete the consolidation journals above and enter the amount of xxx (retained earnings) in the answer block below:
Answer:
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Current Issues In Auditing
Authors: Michael J Sherer, W Stuart Turley
3rd Edition
1853963658, 978-1853963650
