Question 19.8 Business combination valuation entries, pre-acquisition entries subsequent to acquisition
LO5Robert Ltd acquired all the issued shares (cum div.) of Matt Ltd on 1 July 2015. At this date the financial position of Matt Ltd was as follows:
|Plant||$200 000?||$?176 400|
|Accumulated depreciation||(25 600)|
|Receivables||?15 200?||?15 200|
|Cash||??5 000?||??5 000|
|Inventory||?15 000?||?19 000|
|Share capital: 120 000 shares||120 000?|
|General reserve||?23 200?|
|Retained earnings||?44 000?|
|Provisions||?19 200?||19 200|
|Dividend payable||??8 000?||8 000|
The assets of Matt Ltd did not include a patent that was valued by Robert Ltd at $10 000. Its useful life was considered to be 5 years, with benefits being received equally over that period. The plant was considered to have a further 10-year life and is depreciated on a straight-line basis. All the inventory was sold by 30 June 2016. The goodwill on hand at 1 July 2015 was written off as the result of an impairment test conducted in June 2017. The dividend on hand at 1 July 2015 was paid in August 2015.
In exchange for the shares in Matt Ltd, Robert Ltd gave the following consideration:
- ?50 000 shares in Robert Ltd, each share having a fair value of $2.00 per share.
- ?Cash of $40 000.
- ?Artworks having a fair value of $60 000.
Robert Ltd incurred legal and accounting costs of $5000 and share issue costs of $4000.
In January 2019, Matt Ltd paid a bonus dividend of $40 000, being one share for every three shares held, the dividend being paid from retained earnings on hand at 1 July 2015.
The tax rate is 30%.
Prepare the consolidation worksheet entries for consolidated financial statements prepared by Robert Ltd at 30 June 2020.
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