Question 1

Question 1 (19 marks) On 1 January 2020, Company P purchased 80% of the equity of Company 8. The following transactions arose at the acquisition date. Deferred cash payment $1,000,000 payable 3 years later Immediate cash payment $500,000 Issue of P's shares 1,200,000 shares Due diligence fees paid to lawyers $40,000 Equipment transferred $30,000 Note: a. P's effective interest rate was 5% per annum. b. P's share price was $1.3. c. The fair value of non-controlling interests at acquisition date was $640,000. d. Share capital and Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2020. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $800,000. e. Fair value of the equipment transferred was close to its book value. Required: a. Determine the fair value of the consideration transferred on 1 January 2020 in accordance with IFRS 3 Business Combinations. Round to the nearest integer. (3 marks) b. Prepare thejournal entries in P's books on 1 January 2020. (7 marks) 0. Calculate the goodwill on 1 January 2020. (3 marks) d. Discuss the three qualitative factors set out in IFRS 10 Consolidated Financial Statements to determine the existence of \"Control". (6 marks) [Total for Question 1: 19 marks]