Question
On 1 July 2021 Salzburg Ltd acquired the shares of Vienna Ltd for $60 000. At acquisition date, the capital of Vienna Ltd consisted of
On 1 July 2021 Salzburg Ltd acquired the shares of Vienna Ltd for $60 000. At acquisition date, the capital of Vienna Ltd consisted of 44 000 ordinary shares each fully paid at $1. There were retained earnings of $4 000. All the identifiable assets and liabilities of Vienna Ltd were recorded at amounts equal to fair value except for:
Carrying Fair
Amount Value
Inventory $12 000 $15 000
Machinery (cost $100 000) 80 000 82 000
Land 60 000 70 000
Salzburg Ltd Balance Sheet as at 1 July 2021
| Share capital | $134 000 |
| Retained earnings | $41 400 |
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| Cash at bank | $15 400 |
| Land | $100 000 |
| Investment in Wayne Ltd | $60 000 |
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Vienna Ltd Balance Sheet as at 1 July 2021
| Share capital | $44 000 |
| Retained earnings | $4 000 |
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| Cash at bank | $3 000 |
| Machinery | $80 000 |
| Land | $60 000 |
| Inventory | $12 000 |
| Loans | $107 000 |
The Company tax rate is 30%.
Required:
Complete the acquisition analysis as at the date of acquisition. (8 marks)
Prepare the adjusting journal entries for the consolidation worksheet at 1 July 2021. Narrations are required. (17 marks)
Complete the consolidation worksheet as at 1 July 2021 on the next page. (15 marks)
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Auditing Concepts And Methods A Guide To Current Auditing Theory And Practice
Authors: Mcgraw-Hill
5th Edition
0070099995, 978-0070099999
