Question 1 10 marks On 1 July 2015, Fine Ltd acquired all of the issued shares of Ark Ltd. As part of the settlement, Fine Ltd agreed to pay $2,300,000 on 1 July 2015 and $1,800,000 payable on 1 July 2016. The appropriate discount rate was 10% per annum. Fine Ltd also issued 950,000 shares of Fine Ltd to the shareholders of Ark Ltd. At acquisition date, the fair value of the ordinary shares of Fine Ltd were $2.65 and the fair value of the ordinary shares of Ark Ltd were $5.00. Ark Ltd's shareholders' equity on 1 July 2015 consisted of the following: Issued capital $3,800,000 Retained earnings $1,200,000 Total shareholders' equity $5,000,000 At 1 July 2015, all of Ark Ltd's net assets were recorded at fair value, except the following items: Carrying Amount Fair Value Land $2,000,000 $2,700,000 Plant $1,440,000 $1,800,000 . Ark Ltd purchased the land on 1 July 2012 for $2,000,000. The land was sold for $3,200,000 on the 1 June 2018. Ark Ltd purchased the plant on 1 July 2014 for $1,600,000. On 1 July 2014, the plant had an estimated useful life of 10 years with zero residual value. Ark Ltd is depreciating the asset straight- line over its useful life. There is no change to the estimated useful life of the plant at date of acquisition Both Fine Ltd and Ark Ltd use the cost model for the valuation of assets, so any fair value adjustments will be completed as consolidation adjustments. The directors of Fine Ltd believe that the goodwill relating to the acquisition of Ark Ltd was impaired by $150,000 during the year ended 30 June 2016. The company income tax rate is 30% Required: Based on the information provided, prepare an acquisition analysis and complete all necessary consolidation elimination and adjustment entries required as at 30 June 2018 in accordance with AASB 10 Consolidated Financial Statements. Show all workings provided in the answer booklet. . Include all narrations. Show all workings. Where workings are not shown, part marks will not be awarded. . Question 1 10 marks On 1 July 2015, Fine Ltd acquired all of the issued shares of Ark Ltd. As part of the settlement, Fine Ltd agreed to pay $2,300,000 on 1 July 2015 and $1,800,000 payable on 1 July 2016. The appropriate discount rate was 10% per annum. Fine Ltd also issued 950,000 shares of Fine Ltd to the shareholders of Ark Ltd. At acquisition date, the fair value of the ordinary shares of Fine Ltd were $2.65 and the fair value of the ordinary shares of Ark Ltd were $5.00. Ark Ltd's shareholders' equity on 1 July 2015 consisted of the following: Issued capital $3,800,000 Retained earnings $1,200,000 Total shareholders' equity $5,000,000 At 1 July 2015, all of Ark Ltd's net assets were recorded at fair value, except the following items: Carrying Amount Fair Value Land $2,000,000 $2,700,000 Plant $1,440,000 $1,800,000 . Ark Ltd purchased the land on 1 July 2012 for $2,000,000. The land was sold for $3,200,000 on the 1 June 2018. Ark Ltd purchased the plant on 1 July 2014 for $1,600,000. On 1 July 2014, the plant had an estimated useful life of 10 years with zero residual value. Ark Ltd is depreciating the asset straight- line over its useful life. There is no change to the estimated useful life of the plant at date of acquisition Both Fine Ltd and Ark Ltd use the cost model for the valuation of assets, so any fair value adjustments will be completed as consolidation adjustments. The directors of Fine Ltd believe that the goodwill relating to the acquisition of Ark Ltd was impaired by $150,000 during the year ended 30 June 2016. The company income tax rate is 30% Required: Based on the information provided, prepare an acquisition analysis and complete all necessary consolidation elimination and adjustment entries required as at 30 June 2018 in accordance with AASB 10 Consolidated Financial Statements. Show all workings provided in the answer booklet. . Include all narrations. Show all workings. Where workings are not shown, part marks will not be awarded
