Part A Wonderland Ltd distributes an exclusive range of fashion including clothing, cosmetics, jewellery, bags and shoes. It operates ten stores in towns and resorts around the country. Alice Ltd is an investing company which owns shares in several industries including tourism, manufacturing and retail. Alice Ltd owns 42% of the shares in Wonderland Ltd. Hatter Ltd owns 18% of the shares in Wonderland Ltd. The board of Wonderland Ltd has five directors, including two directors appointed by Alice Ltd and one director appointed by Hatter Ltd. The accountants of Alice Ltd and Hatter Ltd are discussing how to account for their respective investments in Wonderland Ltd. Required i 3 marks Advise the accountant of Alice Ltd how to account for the investment in Wonderland Ltd, clearly outlining relevant assumptions and considerations [write 3-5 sentences). Suggest two scenarios in which Hatter Ltd may be required to consolidate Wonderland Ltd (write 2-3 sentences). ii 2 marks Part B On 1 January 2020, Aqua Ltd purchased all the shares of Marine Ltd for $2,000,000. The following extract provides information about Marine Ltd's financial position on that date. Share Capital Retained Earnings Reserves 1,500,000 Buildings 300,000 Accumulated Depreciation 200,000 $ 800,000 (500,000) Additional Information The fair value of the buildings is $400,000. They have a remaining useful life of 25 years. On 30 September 2020, Aqua sold a vehicle to Marine Ltd for $20,000. The vehicle was originally acquired for $40,000 and had been depreciated by $15,000. It has remaining useful life of 3 years. . 4 marks Calculate the goodwill on acquisition, clearly indicating whether it is positive or negative. Prepare the pre-acquisition elimination entries on 31 December 2021 Prepare any other elimination entries required on 31 December 2020 ji 4 marks iii 2 marks Part A Wonderland Ltd distributes an exclusive range of fashion including clothing, cosmetics, jewellery, bags and shoes. It operates ten stores in towns and resorts around the country. Alice Ltd is an investing company which owns shares in several industries including tourism, manufacturing and retail. Alice Ltd owns 42% of the shares in Wonderland Ltd. Hatter Ltd owns 18% of the shares in Wonderland Ltd. The board of Wonderland Ltd has five directors, including two directors appointed by Alice Ltd and one director appointed by Hatter Ltd. The accountants of Alice Ltd and Hatter Ltd are discussing how to account for their respective investments in Wonderland Ltd. Required i 3 marks Advise the accountant of Alice Ltd how to account for the investment in Wonderland Ltd, clearly outlining relevant assumptions and considerations [write 3-5 sentences). Suggest two scenarios in which Hatter Ltd may be required to consolidate Wonderland Ltd (write 2-3 sentences). ii 2 marks Part B On 1 January 2020, Aqua Ltd purchased all the shares of Marine Ltd for $2,000,000. The following extract provides information about Marine Ltd's financial position on that date. Share Capital Retained Earnings Reserves 1,500,000 Buildings 300,000 Accumulated Depreciation 200,000 $ 800,000 (500,000) Additional Information The fair value of the buildings is $400,000. They have a remaining useful life of 25 years. On 30 September 2020, Aqua sold a vehicle to Marine Ltd for $20,000. The vehicle was originally acquired for $40,000 and had been depreciated by $15,000. It has remaining useful life of 3 years. . 4 marks Calculate the goodwill on acquisition, clearly indicating whether it is positive or negative. Prepare the pre-acquisition elimination entries on 31 December 2021 Prepare any other elimination entries required on 31 December 2020 ji 4 marks iii 2 marks
