Question
Question) Black Ltd acquired 25% of the shares of White Ltd on 1 July 2016 for $58,000.At acquisition date the equity of White Ltd consisted
Question) Black Ltd acquired 25% of the shares of White Ltd on 1 July 2016 for $58,000.At acquisition date the equity of White Ltd consisted of:
Share capital $110,000
General reserve $40,000
Retained earnings $90,000
At the date of acquisition, all the assets and liabilities of White Ltd were recorded at fair value other than the following:
Carrying amount Fair value
Equipment (Cost $20,000) $14,000 $19,000
Inventory $5,000 $ 8,000
The inventory was all sold by 30 June 2017.The equipment has a remaining useful life of 10 years
Other information:
a.The inventory of Black Ltd on 30 June 2017 included inventory purchased from White Ltd for $6,000.The original cost of the inventory was $4,000.The inventory was sold to outside parties in September 2017.
b.Black Ltd sold inventory to White Ltd for $9,000 on 1 June 2018.The sale price represented a mark-up of 35% on cost.By 30 June 2018 White Ltd had sold 40% of this inventory outside the group.
c.On 1 June 2018 Black Ltd sold an item of plant to White Ltd for $11,000.The carrying amount at the time of sale was $9,000 (cost was $11,000).At the time of the sale the asset had a remaining useful life of 4 years.
d.The investment account is not considered impaired.
e.Relevant information for White Ltd for the year ended 30 June 2017 and 2018 are shown below:
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