6 Question 1 Wholly Owned Subsidiaries Topic 24 marks MOTHER LTD DAUGHTER LTD

6 question 1 wholly owned subsidiaries topic 24 marks

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6 Question 1: Wholly Owned Subsidiaries Topic (24 marks) MOTHER LTD – DAUGHTER LTD At 1 July 2008: Net fair value of identifiable assets and liabilities of Daughter Ltd = ($100 000 + $50 000 + $36 000) (1) + $10 000 (1 – 30%) (inventory) + $30 000 (1 – 30%) (land) + $20 000 (1 – 30%) (equipment) = $228 000 (1) Consideration transferred = $258 000 Goodwill = $ 30 000 (1) 1. Worksheet entries for 30 June 2009 Business combination valuation entries Cost of Sales Dr 10 000 (2) Income tax expense Cr 3 000 Transfer from BCVR Cr 7 000 Land Dr 30 000 (1) Deferred tax liability Cr 9 000 BCVR Cr 21 000 Accumulated depreciation - equipment Dr 50 000 (2) Equipment Cr 30 000 Deferred tax liability Cr 6 000 BCVR Cr 14 000 Depreciation expense Dr 2 000 (1) Accumulated depreciation Cr 2 000 Deferred tax liability Dr 600 (1) Income tax expense Cr 600 Goodwill Dr 30 000 (1) BCVR Cr 30 000 2. Pre-acquisition entries Retained earnings (op.) Dr 36 000 (2) Share capital Dr 100 000 General reserve Dr 50 000 BCVR Dr 72 000 Shares in Daughter Ltd Cr 258 000 Transfer from BCVR Dr 7 000 (1) BCVR Cr 7 000
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