On 1 July 2013 William Ltd acquired all of the share capital (cum div)of Magnus Limited for a consideration of $600,000 cash and a brand that was held in their accounts at a book value of $10,000 but now had a fair value of $24,000. At the date of acquisition Magnus's accounts showed a dividend payable of $10,000. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: ASSET Inventory Land Plant (less depn) Market Value 18,000 68,000 Book Value 16,000 65,000 17,000 (2000) 15,000 15,000 19,000 14,000 Acounts Receivable The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $14,000 The land was sold on 30/12/16 for $70000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of William Ltd consisted of: Share Capital General Reserve Retained Earnings 380,000 70,000 62,000 Information from the trial balances of Magnus Ltd and William Ltd at 30 June 2017 is presented overleaf. Additional Information 1. On 1 Jan 2017 William Ltd sold inventory to Magnus Ltd costing $70,000 for $80,000. Half of this inventory was sold to outside parties by 30/6/17. 2. On 1 Jan 2016 William Ltd sold inventory costing $12000 to Magnus Ltd for $15,000. Magnus Ltd treats the item as equipment and depreciates it at 10% per annum. 3.On 1 July 2016 William sold plant to Magnus for $21,000. The plant had cost William $24,000 on 1 July 2014 and it was being depreciated at 10% per annum. Magnus regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 William Ltd held inventory that it had purchased from Magnus Ltd on 1 June 2016 at a profit of $5000. All inventory was sold by 30 June 2017 5. Magnus Ltd accrues dividends from William Ltd once they are declared. 6. Magnus Ltd has earned $1600 in interest revenue in the 2017 financial year from William Ltd. 7. Magnus Ltd has earned $3500 in service revenue in the 2017 financial year from William Ltd. 8. Assume a tax rate of 30%. Trial Balances As at 30 June 2017 William Ltd DR CR 1,192,500 DR Magnus Ltd CR 932,500 Sales Revenue 888,000 61,000 5,200 3,500 7,000 4,000 676,000 32,000 4,800 4,800 1,200 6,000 4,800 1,200 8,400 7,000 5,000 7,000 97,120 118,480 190,820 61,280 10,000 12,000 4,400 4,000 Cost of Sales Wages and Salaries Depreciation Expense Service Expense Interest Expense Other Expenses Gain on Sale of Non Current Assets Service Revenue Interest Revenue Dividend Revenue Income tax expense Retained Earnings 1/7/16 Dividend Paid Dividend Declared Share Capital General Reserve Other Equity 1/7/16 Gains on Financial Assets (OCI) Loan Payable to William Ltd Deferred Tax Liability Dividend Payable Shares in Magnus Ltd Cash Inventories Other Current Assets Dividend Receivable Loan receivable from Magnus Ltd Financial Assets Plant and Equipment Acc. Depreciation Plant Land 500,000 155,000 4,000 1,000 380,000 70,000 12,000 6,000 25,000 30,000 4,000 52,000 12,000 147,500 36,000 300,000 614,000 86,000 169,500 11,000 4,000 25,000 15,000 52,000 68,000 28,000 12,600 11,400 70,000 2,134,320 120,000 1,551,180 2,134,320 1,551,180 Required: A. Prepare the acquisition analysis at 1 July 2013. B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013. C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017. On 1 July 2013 William Ltd acquired all of the share capital (cum div)of Magnus Limited for a consideration of $600,000 cash and a brand that was held in their accounts at a book value of $10,000 but now had a fair value of $24,000. At the date of acquisition Magnus's accounts showed a dividend payable of $10,000. At that date all the identifiable assets and liabilities were recorded at fair value with the exception of: ASSET Inventory Land Plant (less depn) Market Value 18,000 68,000 Book Value 16,000 65,000 17,000 (2000) 15,000 15,000 19,000 14,000 Acounts Receivable The inventory was all sold by 30/6/14. The remaining useful life of the plant is 5 years. The accounts receivable were collected by 30/6/14 for $14,000 The land was sold on 30/12/16 for $70000. The plant was on hand still at 30/6/17. At the date of acquisition the equity of William Ltd consisted of: Share Capital General Reserve Retained Earnings 380,000 70,000 62,000 Information from the trial balances of Magnus Ltd and William Ltd at 30 June 2017 is presented overleaf. Additional Information 1. On 1 Jan 2017 William Ltd sold inventory to Magnus Ltd costing $70,000 for $80,000. Half of this inventory was sold to outside parties by 30/6/17. 2. On 1 Jan 2016 William Ltd sold inventory costing $12000 to Magnus Ltd for $15,000. Magnus Ltd treats the item as equipment and depreciates it at 10% per annum. 3.On 1 July 2016 William sold plant to Magnus for $21,000. The plant had cost William $24,000 on 1 July 2014 and it was being depreciated at 10% per annum. Magnus regards the plant as inventory. The inventory was all sold by 30th July 2016. 4. At 1 July 2016 William Ltd held inventory that it had purchased from Magnus Ltd on 1 June 2016 at a profit of $5000. All inventory was sold by 30 June 2017 5. Magnus Ltd accrues dividends from William Ltd once they are declared. 6. Magnus Ltd has earned $1600 in interest revenue in the 2017 financial year from William Ltd. 7. Magnus Ltd has earned $3500 in service revenue in the 2017 financial year from William Ltd. 8. Assume a tax rate of 30%. Trial Balances As at 30 June 2017 William Ltd DR CR 1,192,500 DR Magnus Ltd CR 932,500 Sales Revenue 888,000 61,000 5,200 3,500 7,000 4,000 676,000 32,000 4,800 4,800 1,200 6,000 4,800 1,200 8,400 7,000 5,000 7,000 97,120 118,480 190,820 61,280 10,000 12,000 4,400 4,000 Cost of Sales Wages and Salaries Depreciation Expense Service Expense Interest Expense Other Expenses Gain on Sale of Non Current Assets Service Revenue Interest Revenue Dividend Revenue Income tax expense Retained Earnings 1/7/16 Dividend Paid Dividend Declared Share Capital General Reserve Other Equity 1/7/16 Gains on Financial Assets (OCI) Loan Payable to William Ltd Deferred Tax Liability Dividend Payable Shares in Magnus Ltd Cash Inventories Other Current Assets Dividend Receivable Loan receivable from Magnus Ltd Financial Assets Plant and Equipment Acc. Depreciation Plant Land 500,000 155,000 4,000 1,000 380,000 70,000 12,000 6,000 25,000 30,000 4,000 52,000 12,000 147,500 36,000 300,000 614,000 86,000 169,500 11,000 4,000 25,000 15,000 52,000 68,000 28,000 12,600 11,400 70,000 2,134,320 120,000 1,551,180 2,134,320 1,551,180 Required: A. Prepare the acquisition analysis at 1 July 2013. B. Prepare the BCVR and pre-acquisition journal entries at 1 July 2013. C. Prepare the BCVR and pre-acquisition journal entries at 30 June 2017