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
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: (a) Use the worksheet below to compute Goodwill or Gain on acquisition andthe Non-controlling interest using net method. (3 marks) (b) Provide the necessary journal entries for Soft Ltd (parent) to eliminate Hards share of pre-acquisition capital and reserves. (2 marks) (c) Prepare the journal entry to recognise the Non-controlling interest. (2 marks)
Elimination of investment in Hard Ltd | Hard Ltd (S) $,000 | Soft Ltd (P) $,000 | 30% NCI $,000 |
Fair Value of consideration transferred |
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Less: FV of identifiable assets acquired and liabilities assumed |
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Share capital on acquisition date |
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Revalue surplus-acquisition date |
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Retained earnings-acquisition date |
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Fair value adjustment |
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Goodwill / Gain on acquisition |
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NON-controlling interest |
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