Question 1: Consolidations
On 1 July 2011 Martin Ltd acquired all of the shares of Lewis Ltd for $4,946,505
At the 1 July 2011 the statement of financial position of Lewis Ltd was as follows:
Lewis Ltd
Statement of Financial Position
as at 1 July 2011
|
Current Assets
|
|
|
|
Current Liabilities
|
|
|
|
|
Cash at Bank
|
|
43,200
|
|
Accounts Payable
|
|
126,000
|
|
|
Accounts Receivable (net)
|
89,280
|
|
|
|
|
|
|
|
Inventory
|
|
187,200
|
319,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Current Assets
|
|
|
|
Equity
|
|
|
|
|
|
Land
|
|
|
1,920,000
|
|
Share Capital
|
|
2,740,608
|
|
|
|
Motor Vehicles
|
|
273,000
|
|
Reserves
|
|
685,152
|
|
|
|
Plant and Equipment
|
2,160,000
|
|
Retained Earnings
|
1,141,920
|
4,567,680
|
|
|
Goodwill
|
|
|
21,000
|
4,374,000
|
|
|
|
|
|
|
|
|
|
4,693,680
|
|
|
|
4,693,680
|
|
The following information about the value of assets was provided:
|
|
Cost
|
Accum depreciation
|
Fair value
|
|
Inventory
|
$187,200
|
|
$234,000
|
|
Motor Vehicles
|
$327,600
|
$54,600
|
$313,950
|
|
Plant and Equipment
|
$2,808,000
|
$648,000
|
$2,592,000
|
The Motor Vehicle is expected to have a further 4 years useful life and the Plant and Equipment is expected to have a further 5 years useful life. All inventory on hand at 1 July 2011 was sold by 30 June 2012. At 1 July 2011 Lewis Ltd had a contingent liability of $70,000 The contingent liability was settled in February 2012 for $67,900 The tax rate is 30%.
Required:
a. Do the necessary acquisition analysis and provide the business combination valuation entries and the pre-acquisition adjustment entry at acquisition date.
b. Provide the business combination valuation entries and the pre-acquisition adjustment entry at 30 June 2013.