Question
Pride Ltd acquired 100 per cent of the issued capital of Stride Ltd on 30 June 2022 for $900 000, when the statement of financial
Pride Ltd acquired 100 per cent of the issued capital of Stride Ltd on 30 June 2022 for $900 000, when the statement of financial position of Stride Ltd was as follows:
Statement of financial position of Stride Ltd as at 30 June 2022
$000
$000
Assets
Liabilities
Accounts receivable
70
Loan
300
Inventory
100
Land
400
Shareholders' equity
Property, plant and equip.
700
Share capital
500
Accumulated depreciation
(270)
Retained earnings
200
1 000
1 000
Additional information
The tax rate is 30 per cent.
As at the date of acquisition, all assets of Stride Ltd were at fair value, other than the property, plant and equipment, which had a fair value of $530 000. Stride Ltd adopts the cost model for measuring its property, plant and equipment. The property, plant and equipment is expected to have a remaining useful life of 10 years, and no residual value.
One year following acquisition it was considered that Stride Ltd's goodwill had a recoverable amount of $80 000.
The statements of financial position and details of opening and closing retained earnings of Pride Ltd and Stride Ltd one year after acquisition are as follows:
Statements of financial position of Pride Ltd and Stride Ltd as at 30 June 2023
Pride Ltd ($000)
Stride Ltd ($000)
Assets
Cash
80
40
Accounts receivable
50
50
Inventory
140
123
Land
600
400
Property, plant and equipment
900
700
Accumulated depreciation
(300)
(313)
Investment in Stride Ltd
900
-
Total assets
2 370
1 000
Liabilities
Accounts payable
100
10
Dividends payable
100
50
Loan
670
140
Shareholders' equity
Share capital
1 000
500
Retained earnings
500
300
2 370
1 000
Reconciliation of opening and closing retained earnings
Profit after tax
400
190
Retained earnings30 June 2022
300
200
Interim dividend
(90)
(40)
Final dividend
(110)
(50)
Retained earnings30 June 2023
500
300
Required
Prepare the consolidation journal entries necessary to consolidate Pride Ltd and Stride Ltd at 30 June 2023.(8 marks)
Prepare the consolidated worksheet of Pride Ltd and Stride Ltd at 30 June 2023.(10 marks)
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College Accounting Chapters 1- 9
Authors: James A Heintz, Robert W Parry
23rd Edition
1337794783, 978-1337794787
