Consolidation worksheet entries
1. Calculate the acquisition analysis.
2. Prepare the consolidation worksheet entries for the preparation by Zack Ltd of its consolidated financial statements at 30 June 2016.
On 1 July 2015, Zack Ltd acquired all the issued shares (ex div.) of William Ltd for $227 500. At this date the equity of William Ltd consisted of:
Share capital $ 150 000
General reserve 34 000
Retained earnings 20 000
At acquisition date, William Ltd reported a dividend payable of $8000. All the identifiable assets and liabilities of William Ltd were recorded at amounts equal to their fair values except for:
Carrying amount Fair value
Plant (cost $200 000) $175 000 $190 000
Land $150 000 $155 000
Inventory $32 000 $40 000
The plant was considered to have a further 3-year life. Of the inventory, 90% was sold by?30 June 2016 and the remainder was sold by 30 June 2017. The land was sold in January 2016 for $170 000. William Ltd had recorded goodwill of $2000 (net of accumulated impairment losses of $12 000). William Ltd was involved in a court case that could potentially result in the company paying damages to customers. Zack Ltd calculated the fair value of this liability to be $8000, even though William Ltd had not recorded any liability.
The following events occurred in the year ending 30 June 2016.
- On 12 August 2015 William Ltd paid the dividend that existed at 1 July 2015.
- On 1 December 2015 William Ltd transferred $17 000 from the general reserve existing at ?1 July 2015 to retained earnings.
- On 1 January 2016 William Ltd made a call of 10c per share on its issued shares. William ?Ltd had 100 000 shares on issue. All call money was received by 31 January 2016.
- On 29 June 2016 William Ltd reassessed the liability in relation to the court case as the ?chances of winning the case had improved. The fair value was now considered to be $2000.