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B407F Lecturre 2 Consolidation handout1

B407F Lecturre 2 Consolidation handout1 - ACT B407F Lecture...

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ACT B407F Lecture 2 – Consolidation I : handouts Example 1 – wholly-owned subsidiary 1.1 – on acquisition H Ltd acquires all of the share capital of S Ltd on 1 January 20x1 for cash of $3,800. The statements of financial position of H Ltd and S Ltd at 31 December 20x0: H Ltd S Ltd Property, plant and equipment $4,000 $3,200 Current assets 6,200 500 10,200 3,700 Ordinary share capital ($ 1 share) 8,000 3,000 Retained earnings 1,900 500 9,900 3,500 Current liabilities 300 200 10,200 3,700 In H Ltd’s book (i) on 1 January 20x1 : Entry made by H Ltd on acquisition Dr. Investment in S Ltd Cr. Cash Record the acquisition of shares in subsidiary Statement of Financial Position of H Ltd as at 1 January 20x1 after the acquisition of S Ltd PPE $4,000 Investment in S Ltd Current assets 2,400 10,200 Ordinary share capital 8,000 Retained earnings 1,900 9,900 Current liabilities 300 10,200 (ii) On 31 Dec 20x1 1
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If S Ltd’s makes profit of $200 during 20x1, and distributes dividend of $50 on 31 Dec 20x1 Journal entry in H Ltd’s book: Dr. Bank $50 Cr. Investment income $50 Consolidation Determine: (1) Acquisition date? (2) No. of shares in S Ltd acquired by H Ltd?
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