On 1 st January 2016, Soft Ltd acquired 70% of share capital of Hard Ltd for $8,175,000.
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Question:
On 1st January 2016, Soft Ltd acquired 70% of share capital of Hard Ltd for $8,175,000. Equity of Hard Ltd was:
Share capital $7,600,000
General reserve $2,100,000
Retained earnings $1,200,000
All assets of Hard Ltd were recorded at fair value on acquisition except for an item of marine equipment that had a higher fair value of $360,000 than its carrying amount. Cost of the marine equipment was $2,100,000 accumulated depreciation of $1,372,000.
Required:
- Use the worksheet below to compute Goodwill or Gain on acquisition and the Non-controlling interest using net method. (3 marks)
- Provide the necessary journal entries for Soft Ltd (parent) to eliminate Hard's share of pre-acquisition capital and reserves. (2 marks)
- Prepare the journal entry to recognise the Non-controlling interest. (2 marks)
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