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On 1 st 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

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:

  1. Use the worksheet below to compute Goodwill or Gain on acquisition and the Non-controlling interest using net method.
  2. Provide the necessary journal entries for Soft Ltd (parent) to eliminate Hard's share of pre-acquisition capital and reserves.
  3. Prepare the journal entry to recognise the Non-controlling interest.
Elimination of investment in Hard Ltd

Hard Ltd

(S) $,000

Soft Ltd

(P) $,000

30% NCI

$,000

Fair Value of consideration transferred
Less: FV of identifiable assets acquired and liabilities assumed
Share capital on acquisition date
Revalue surplus-acquisition date
Retained earnings-acquisition date
Fair value adjustment
Goodwill / Gain on acquisition
NON-controlling interest

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