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[solution]: Question 19.8 Business combination valuation entries,


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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)  
Goodwill ??4 800?  
Receivables ?15 200? ?15 200
Cash ??5 000? ??5 000
Inventory ?15 000? ?19 000
  214 400?  
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
  214 400  

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%.


Required

Prepare the consolidation worksheet entries for consolidated financial statements prepared by Robert Ltd at 30 June 2020.


 


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