# Liabilities were recorded at fair value except for

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liabilities were recorded at fair value except for the following assets: Carrying amount Fair value Inventory \$ 140 000 \$ 200 000 Plant (cost \$340 000) 300 000 380 000 Land 100 000 200 000 The plant has a remaining useful life of 10 years. As a result of an impairment test, all goodwill was written off in 2016. All the inventory on hand at 1 July 2013 was sold by 30 June 2014. Differences between carrying amounts and fair values are recognised on consolidation. The tax rate is 30%. 4

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The trial balances of Carla Ltd and Hagen Ltd at 30 June 2019 are: Carla Ltd Hagen Ltd Shares in Hagen Ltd \$ 500 000 Plant 851 000 \$ 380 000 Land 220 000 100 000 Current assets 324 000 168 000 Cost of sales 450 000 70 000 Other expenses 130 000 14 000 Income tax expense 100 000 10 000 \$ 2 575 000 \$ 742 000 Share Capital \$ 800 000 200 000 General reserve 120 000 160 000 Retained earnings (1/7/18) 240 000 150 000 Sales revenue 1 021 200 160 000 Payables 145 800 24 000 Accumulated Depreciation (plant) 248 000 48 000 \$ 2 575 000 \$ 742 000 Required: A. Prepare the consolidated worksheet entries immediately after acquisition date. B. Prepare the consolidated worksheet entries at 30 June 2014. Assume a profit for Hagen Ltd for the 2013-2014 period of \$80 000. 5
Pre-acquisition analysis At 1 July 2013: Net fair value of identifiable assets and liabilities of Hagen Ltd = (\$200 000 + \$120 000 + \$80 000) (equity) + \$80 000 (1 – 30%) (plant) + \$100 000 (1 – 30%) (land) + \$60 000 (1 – 30%) (inventory) = \$568 000 Net fair value acquired = 75% x \$568 000 = \$426 000 Consideration transferred = \$500 000 Goodwill: parent only = \$74 000 A. Consolidation worksheet entries at 1 July 2013 (6 Marks) 1. Business combination valuation entries Plant Dr 40 000 Accumulated depreciation Dr 40 000 Deferred tax liability Cr 24 000 Business combination valuation reserve Cr 56 000 Land Dr 100 000 Deferred tax liability Cr 30 000 Business combination valuation reserve Cr 70 000 Inventory Dr 60 000 Deferred tax liability Cr 18 000 Business combination valuation reserve Cr 42 000 6

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2. Pre-acquisition entries Retained earnings (1/7/13) Dr 60 000 Share capital Dr 150 000 General reserve Dr 90 000 Business combination valuation reserve Dr 126 000 Goodwill Dr 74 000 Shares in Mouse Ltd Cr 500 000 3. NCI in equity at 1/7/13 Retained earnings (1/7/03) Dr 20 000 Share capital Dr 50 000 General reserve Dr 30 000
• Fall '19

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