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On 1 July 2020, Bowie Ltd acquired all the shares of David Ltd for $500,000 on an ex-div . basis. On this date, the equity

On 1 July 2020, Bowie Ltd acquired all the shares of David Ltd for $500,000 on an ex-div. basis. On this date, the equity and liabilities of David Ltd included the following balances:

Share capital $100,000
General reserve 25,000
Retained earnings 145,000
Dividend Payable -ex div basis 8,000

At acquisition date, all the identifiable assets and liabilities of David Ltd were recorded at

amounts equal to fair value except for:

Carrying amount Fair value Useful life at acquisition date
Land 700,000 900,000 Sold 30/4/2022

Plant and equipment

(cost $500,000)

$400,000 $404,000 5 years
Trade mark 50,000 60,000 Indefinite life
Motor vehicle (cost $90,000) 60,000 75,000 5 years
Inventories 2,000 12,000 100% sold externally during the year ended 30/6/2021

Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed.

Additional information

  1. On 1 July 2021, Bowie Ltd has on hand inventory worth $34 000, being transferred from David Ltd in June 2021. The inventory had previously cost David Ltd $30 000.
  2. On 1 January 2022, David Ltd sold an item of plant with a carrying amount of $115 000 to Bowie Ltd for $125 000. Bowie Ltd treated this item as inventory. The item was still on hand at the end of the year. David Ltd applied a 20% depreciation rate to this plant.
  3. On 1 March 2022, David Ltd acquired $9 000 inventory from Bowie Ltd. This inventory originally cost Bowie Ltd $5 000. 25% of this inventory has been sold to external parties for $35,000.
  4. On 1 January 2021, Bowie Ltd sold office equipment to David Ltd for $2,000. This office equipment had originally cost Bowie Ltd $5 000 and had a carrying amount at the time of sale of $1,000. Both entities charge depreciation at a rate of 20% p.a.
  5. On June 2021 Bowie Ltd gave David Ltd a loan of $425 000. David Ltd has not made any repayments on the loan. Interest is charged at 15% per annum on the loan and the last interest payment was made on 31 March 2022. Both companies have recorded accruals at year end.

The corporate tax rate is 30%.

1. Prepare the acquisition analysis as at 1 July 2020 for the Bowie Ltd Group

2. Prepare the consolidation entries as at 30 June 2022 for the Bowie Ltd Group. Notes: CONSOLIDATION ENTRIES PLEASE, NOT WORKSHEET.

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