On1 July 2018, Parent Ltd acquired all the shares of Son lid, on a cum-dir. basis for $2,057,000. At this date, the equity of Sond consisted of Share capital - 50000 shares $ 1,000,000 Retained earings 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50,000 the acquisition date. The dividend payable was subsequently paid in September 2016 At the acquisition date, all the identifiable assets and abilities of Son Lid were recorded at amounts equal to fair value except for the following Carrying amount Fair value Inventory 40.000 90.000 Plantfest 00000 100 000 Of the inventory on hand in Son Ltd 1 July 2018, 60 percent was sold in August 2015 and the remainder was sold in June 2019. It was estimated that the plant has a further 5 year life with pero residuale Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date. Parent lid calculated the fair value of this liability to be $50,000, even though Son Lid had not recorded any provision for damages ability on 29 June 2020 Son Ltd reassessed the ability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000 The company applies the partial goodwill method. The income tax rate is 30%. During the period 1 y 2018 to 30 line 2020, the following intragroup transactions have occurred between Parent und and Son Lad (TH) on 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ind. The furniture had originally cost Parent Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2009. $60,000 was outstanding At 30 June 2020, 520,000 was still not paid and outstanding. Both ents apply depreciation on a straight line basis. Atlanuary 2019, the future had a further five years of life with zero residual value (2) On 1 March 2019, Son Lnd sold inventory costing $12,000 to Parent Lid for $15,000. On 1 October 2013. Parent Ltd sold half of these inventory items back to Son Ltd for 6.000.0F the remaining inventory kept by Parent Ltd, hall was sold in March 2020 to Dingo data profit of SADO Required: Prepare the acquisition analysis at 2018 b) Prepare the consolidation worksheet entries at 20 June 2020. Your answer should include: 1. BCVR entries. 2. Pre-acquisition entries, and 3. Intragroup transaction adjustment entries 12 The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below Sales revenue 16 000 Cost of sales 12 000 Inventory Deferred tax asset (30% 1200 Income tax expense 1200 Explain why the above entries are made for the intragroup transaction (T2) as at 30 2019, noting the adjustments to each account separately dj Critically analyze the accounting treatment of acquisition related costs in a business combination. For your critical analysis, you could compare with how acquisition related costs are accounted for when a company purchases property plant and equipment word limit: 150 words (10 On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of: Share capital - 500 000 shares Retained earnings $ 1,000,000 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50,000 at the acquisition date. The dividend payable was subsequently paid in September 2018. At the acquisition date, all the identifiable assets and liabilities of Son Ltd were recorded at amounts equal to fair value except for the following: Carrying amount Fair value Inventory 40,000 50,000 Plant (cost $500 000) 300 000 350,000 of the inventory on hand in Son Ltd at 1 July 2018, 60 percent was sold in August 2018 and the remainder was sold in June 2019. It was estimated that the plant has a further 5-year life with zero residual value. Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date, Parent Ltd calculated the fair value of this liability to be $50,000, even though Son Ltd had not recorded any provision for damages (liability). On 29 June 2020 Son Ltd reassessed the liability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000. The company applies the partial goodwill method. The income tax rate is 30%. During the period 1 July 2018 to 30 June 2020, the following intragroup transactions have occurred between Parent Ltd and Son Ltd: (T1) On 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ltd. The furniture had originally cost Parent Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2019, $60,000 was outstanding. At 30 June 2020, $20,000 was still not paid and outstanding. Both entities apply depreciation on a straight-line basis. At 1 January 2019, the furniture had a further five years of useful life, with zero residual value. (T2) On 1 March 2019, Son Ltd sold inventory costing $12,000 to Parent Ltd for $15,000. On 1 October 2019, Parent Ltd sold half of these inventory items back to Son Ltd for $6,000. Of the remaining inventory kept by Parent Ltd, half was sold in March 2020 to Dingo Ltd at a profit of $400 Required: a) Prepare the acquisition analysis at 1 July 2018. (9 marks) b) Prepare the consolidation worksheet entries at 30 June 2020. Your answer should include: 1. BCVR entries, 2. Pre-acquisition entries, and 3. Intragroup transaction adjustment entries (T1 to 12). (46 marks) c) The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below. 16 000 Sales revenue Cost of sales Inventory Dr Cr Cr 12 000 4 000 Deferred tax asset (30%) Income tax expense Dr 1 200 1 200 Explain why the above entries are made for the intragroup transaction (T2) as at 30 June 2019, noting the adjustments to each account separately. (5 marks) d) Critically analyze the accounting treatment of acquisition related costs in a business combination. For your critical analysis, you could compare with how acquisition related costs are accounted for when a company purchases property plant and equipment. [word limit: 150 words] (10 marks) On1 July 2018, Parent Ltd acquired all the shares of Son lid, on a cum-dir. basis for $2,057,000. At this date, the equity of Sond consisted of Share capital - 50000 shares $ 1,000,000 Retained earings 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50,000 the acquisition date. The dividend payable was subsequently paid in September 2016 At the acquisition date, all the identifiable assets and abilities of Son Lid were recorded at amounts equal to fair value except for the following Carrying amount Fair value Inventory 40.000 90.000 Plantfest 00000 100 000 Of the inventory on hand in Son Ltd 1 July 2018, 60 percent was sold in August 2015 and the remainder was sold in June 2019. It was estimated that the plant has a further 5 year life with pero residuale Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date. Parent lid calculated the fair value of this liability to be $50,000, even though Son Lid had not recorded any provision for damages ability on 29 June 2020 Son Ltd reassessed the ability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000 The company applies the partial goodwill method. The income tax rate is 30%. During the period 1 y 2018 to 30 line 2020, the following intragroup transactions have occurred between Parent und and Son Lad (TH) on 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ind. The furniture had originally cost Parent Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2009. $60,000 was outstanding At 30 June 2020, 520,000 was still not paid and outstanding. Both ents apply depreciation on a straight line basis. Atlanuary 2019, the future had a further five years of life with zero residual value (2) On 1 March 2019, Son Lnd sold inventory costing $12,000 to Parent Lid for $15,000. On 1 October 2013. Parent Ltd sold half of these inventory items back to Son Ltd for 6.000.0F the remaining inventory kept by Parent Ltd, hall was sold in March 2020 to Dingo data profit of SADO Required: Prepare the acquisition analysis at 2018 b) Prepare the consolidation worksheet entries at 20 June 2020. Your answer should include: 1. BCVR entries. 2. Pre-acquisition entries, and 3. Intragroup transaction adjustment entries 12 The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below Sales revenue 16 000 Cost of sales 12 000 Inventory Deferred tax asset (30% 1200 Income tax expense 1200 Explain why the above entries are made for the intragroup transaction (T2) as at 30 2019, noting the adjustments to each account separately dj Critically analyze the accounting treatment of acquisition related costs in a business combination. For your critical analysis, you could compare with how acquisition related costs are accounted for when a company purchases property plant and equipment word limit: 150 words (10 On 1 July 2018, Parent Ltd acquired all the shares of Son Ltd, on a cum-div. basis, for $2,057,000. At this date, the equity of Son Ltd consisted of: Share capital - 500 000 shares Retained earnings $ 1,000,000 500,000 Son Ltd also reported a dividend payable of $100,000 and a recorded goodwill of $50,000 at the acquisition date. The dividend payable was subsequently paid in September 2018. At the acquisition date, all the identifiable assets and liabilities of Son Ltd were recorded at amounts equal to fair value except for the following: Carrying amount Fair value Inventory 40,000 50,000 Plant (cost $500 000) 300 000 350,000 of the inventory on hand in Son Ltd at 1 July 2018, 60 percent was sold in August 2018 and the remainder was sold in June 2019. It was estimated that the plant has a further 5-year life with zero residual value. Son Ltd was involved in a court case that could potentially result in the company paying damages to customers. At the acquisition date, Parent Ltd calculated the fair value of this liability to be $50,000, even though Son Ltd had not recorded any provision for damages (liability). On 29 June 2020 Son Ltd reassessed the liability in relation to the court case as the chance of winning the case had improved. The fair value on 29 June 2020 was considered to be $30,000. The company applies the partial goodwill method. The income tax rate is 30%. During the period 1 July 2018 to 30 June 2020, the following intragroup transactions have occurred between Parent Ltd and Son Ltd: (T1) On 1 January 2019, Parent Ltd acquired furniture for $100,000 from Son Ltd. The furniture had originally cost Parent Ltd $150,000 and had a carrying amount at the time of sale of $80,000. The sale was made on credit. At 30 June 2019, $60,000 was outstanding. At 30 June 2020, $20,000 was still not paid and outstanding. Both entities apply depreciation on a straight-line basis. At 1 January 2019, the furniture had a further five years of useful life, with zero residual value. (T2) On 1 March 2019, Son Ltd sold inventory costing $12,000 to Parent Ltd for $15,000. On 1 October 2019, Parent Ltd sold half of these inventory items back to Son Ltd for $6,000. Of the remaining inventory kept by Parent Ltd, half was sold in March 2020 to Dingo Ltd at a profit of $400 Required: a) Prepare the acquisition analysis at 1 July 2018. (9 marks) b) Prepare the consolidation worksheet entries at 30 June 2020. Your answer should include: 1. BCVR entries, 2. Pre-acquisition entries, and 3. Intragroup transaction adjustment entries (T1 to 12). (46 marks) c) The adjusting consolidation entries at 30 June 2019 for the last intragroup transaction (T2) is provided below. 16 000 Sales revenue Cost of sales Inventory Dr Cr Cr 12 000 4 000 Deferred tax asset (30%) Income tax expense Dr 1 200 1 200 Explain why the above entries are made for the intragroup transaction (T2) as at 30 June 2019, noting the adjustments to each account separately. (5 marks) d) Critically analyze the accounting treatment of acquisition related costs in a business combination. For your critical analysis, you could compare with how acquisition related costs are accounted for when a company purchases property plant and equipment. [word limit: 150 words] (10 marks)