UNIVERSITIES Part A Question 1 (40 marks) On 1 July 2019, John Ltd acquired all the issued shares of Wayne Ltd for $250,000. At this date, the financial statements of Wayne Ltd showed the following: Share capital Retained earnings General Reserve Total equity $ 170,000 30,500 4,800 205,300 At acquisition date, all the net identifiable assets and liabilities in Wayne Ltd were recorded at amounts equal to their fair value except for: Asset Inventories Plant (cost $400,000) Carrying amount ($) 5,000 200,000 Fair Value ($) 8,000 210,000 The records also showed that the company had recorded existing goodwill of $5,000. The Plant was calculated to have a further life of 5 years, and was depreciated on a straight- line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: (a) Prepare the acquisition analysis at 1 July 2019. (6 marks) (b) Prepare the consolidation entries at acquisition date, 1 July 2019. Include narrations for each entry. (15 marks) (c) Prepare the consolidation worksheet as at 1 July 2019. (13 marks) (d) Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2019 in narrative format. (6 marks) Question 1 (c) (13 marks) Consolidation worksheet answer: Financial statements John Ltd Wayne Ltd Group Adjustments Debit Credit Share capital 200,000 170,000 50,000 0 Retained earnings General Reserve BCVR Total Equity 30,500 4,800 0 0 250,000 205,300 Current Assets Inventory Other assets 30,000 0 5,000 41,300 Non-current Assets Plant (at cost) 45000 Accumulated depreciation -25,000 Goodwill 0 Investment in Kelly Ltd 250,000 Total Assets 300,000 400,000 -200,000 5,000 251,300 Current Liabilities Deferred Tax liability Debentures 0 50,000 0 46,000 205,300 Net Assets 250,000