Wk%203%20Lecture%20illustration%20solution.docx

Zzrs directors conclude that the initially determined

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ZZR’s directors conclude that the initially determined values are appropriate and do not require any restatement, gain on bargain purchase amounts to $40 000 (the amount by which the value of the net assets of $540 000 exceeds the $500 000 value of the consideration transferred). In this situation, the excess of fair value over the value of consideration transferred (the amount of the bargain purchase, or the discount on acquisition) is recognised as a gain in profit and loss. ZZR would record the following journal entry on 30 June 20X5 to record the combination: Debit Credit $ $ Inventory 40 000 Motor Vehicles 60 000 Plant & Equipment 150 000 Land & Buildings 300 000 Patents 50 000 Creditors 60 000 Gain on Bargain Purchase (P&L) 40 000 Shares in McCoy Ltd (cost) 75 000 Gain on disposal of McCoy shares (P&L) 25 000 Share Capital 400 000 (Purchase consideration to CRR Pty Ltd)
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3 Comprehensive Exercise 9.24 Cost of the business combination to Hong Ltd: amounts Consideration transferred $ Cash 120 000 Shares in Coles Myer Ltd (fair market value) 90 000 New shares in Hong issued (50 000 x $4.00) 200 000 Cost of acquisition $410 000 Net Assets acquired (Fair value): $375 000 Goodwill: $(410 000 – 375 000) = $35 000 Hong would record the following journal entries to record the business combination: Debit Credit $ $ Cash at Bank 120 000 Bank Loan 120 000 (Proceeds from bank loan)
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4 Debtors 20 000 Inventory 60 000 Motor Vehicles 50 000 Plant & Equipment 150 000 Land & Buildings 300 000 Goodwill
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