Question
On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date
On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows:
|
| Big Ltd ($) | Small Ltd ($) |
| Assets |
|
|
| Cash | 21,000 | 10,500 |
| Accounts receivable | 315,000 | 115,500 |
| Land | 420,000 | 210,000 |
| Plant | 1,680,000 | 1,050,000 |
| Investment in Small Ltd | 1,050,000 |
|
|
| 3,486,000 | 1,386,000 |
| Liabilities |
|
|
| Accounts payable | 126,000 | 63,000 |
| Loans payable | 840,000 | 315,000 |
| Shareholders equity |
|
|
| Share capital | 2,100,000 | 420,000 |
| Retained earnings | 420,000 | 588,000 |
|
| 3,486,000 | 1,386,000 |
Needed
A) Find the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value.
B) Make consolidation journal entries.
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