ACQUISITION ANALYSIS As investment in B mm MARKS Cost of acquisition of

Acquisition analysis as investment in b mm marks cost

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ACQUISITION ANALYSIS A’s investment in B $m $m MARKS Cost of acquisition of investment in B Ltd Purchase consideration – 1m shares @ $2.00 each 20 1 Carrying amount of identifiable net assets of B at 1.1.X1 Share capital 5 ½ Retained profits 10 ½ Fair value adjustment Land ($5m – $1m) 4 ½ Inventory ($2m - $1m) 1 ½ Deferred tax liability @ 30% (1.5) 1 Identifiable net assets acquired at fair value 18.5 Interest acquired by A Ltd 80% 1 (14.8) 5 Difference – goodwill on acquisition 5.2 (b) CONSOLIDATION JOURNALS 31 DECEMBER 20X1 Valuation entries for B Ltd’s land and inventory including tax consequences $m $m MARKS DR Land 4 ½ DR Cost of sales – opening inventory 1 ½ CR Income tax expense 0.3 ½ CR Deferred tax liability 1.2 ½ CR BCVR 3.5 ½ 2.5 OR (b)CONSOLIDATION JOURNALS 31 DECEMBER 20X1 Valuation entries for B Ltd’s land and inventory including tax consequences $m $m MARKS DR Land 4 CR Deferred tax liability 1.2 All correct CR BCVR 2.8 1 1 30
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