Exam 18: Acquisition Method Application After Control Date

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was: 1 January 20X0 $\quad$$\quad$$\quad$ $100 000 31 December 20X3 $\quad$$\quad$ $270 000 31 December 20X6 $\quad$$\quad$ $240 000 31 December 20X8 $\quad$$\quad$ $360 000 The group applies the cost model.The carrying amount of the land immediately before control date is $40 000. What is the correct consolidation data adjustment entry for 31 December 20X9?

Wholly-owned Subsidiary has the following balances at control date 20X1: Capital \ 500000 Asset revaluation reserve \ 200000 Retained profits \ 100000 During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The asset revaluation reserve all relates to previous revaluation of plant. During 20X3 Subsidiary incurs $50 000 of losses. The substitution elimination in 20X3 for retained profits would be Cr.$25 000.

Judith Ltd took control of Athol Ltd on 1 January 20X5.Athol inventory is overstated by $5000 but is shown at the correct amount in the Judith group consolidation.The tax rate is 30%. What would be the consolidation data adjustment entry for 1 January 20X5?

Angels Ltd acquired 100% of ACDC Ltd on 1 July 20X0 for $2 000 000, when the equity of ACDC Ltd comprised paid up capital of $1 400 000 and retained profits of $300 000.All ACDC Ltd's balance sheet was reported at fair value at acquisition date.During the year ended 30 June 20X1 ACDC Ltd declared and paid a total dividend of $100 000 out of pre-acquisition profits.What is the elimination entry for these transactions for the year ended 30 June 20X1? Assume AASB 127.38A was operational during this period.

Wholly owned Subsidiary has the following balances at control date 20X1: Capital \ 500000 Asset revaluation reserve \ 200000 Retained profits \ 100000 During 20X2 Subsidiary generates $100 000 profits and revalues plant downwards by $375 000.The asset revaluation reserve all relates to previous revaluation of plant. During 20X3 Subsidiary incurs $50 000 of losses. The substitution elimination in 20X3 for asset revaluation reserve would be Cr.$200 000.

Subsidiary has property recorded at $60 000 using the cost method.Parent assesses the fair value of the property at $130 000.Group policy is to use the cost method.The correct consolidation data adjustment for the property is: Dr.Property $\quad$$\quad$$\quad$ $70 000 Cr.Asset revaluation reserve $\quad$$\quad$ $70 000

The elimination of intra-group debts does not have any tax effects.

Honky Ltd acquired all the issued share capital of Cat Ltd on 1 July 20X0.Goodwill acquired was $1 000 000 and Honky Ltd tests this goodwill for impairment every year.As at July 1 20X5 $500 000 or the original goodwill had been recorded as impaired.For the year ended June 30 20X6 a further $100 000 was regarded as being impaired.What is the elimination journal entry accounting for the impairment of this goodwill in Honky Ltd's consolidated financial statements for the year ended 30 June 20X6?

Wholly owned Subsidiary has the following balances at control date 20X1: Capital \ 500000 Asset revaluation reserve \ 200000 Retained profits \ 100000 Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%. Subsidiary assets are at fair value except for inventory, which the Subsidiary measures at $20 000.Under group policy the amount would be $10 000. In the consolidation there will be a deferred tax liability of $3000.

Reith Ltd owns all of the 10 million issued ordinary shares of Beasley Ltd.Beasley Ltd declared and paid a dividend of $0.80 per share during the 20X1 financial year out of profits it earned during 1999.Reith Ltd acquired Beasley Ltd in 20X0.What is the journal entry recorded by Reith Ltd in its own accounts for the 20X1 financial year?

Led Ltd acquired 100% of Zeppelin Ltd on 30 June 20X0 by paying $7 million cash.At that date the net assets of Zeppelin Ltd was as follows: Recorded amount Fair value Total assets \ 9 million \ 10 million Total liabilities \ 1 million \ 1 million Net assets \ 8 million \ 9 million Total assets comprise buildings of $6 million, equipment of $3 million and accounts receivable of $1 million.All these figures are fair values.What is the recorded amount of buildings in Led Ltd's consolidated financial statements for the year ended 30 June 20X0? Assume no asset revaluations.

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was: 1 January 20X0 $\quad$$\quad$$\quad$ $100 000 31 December 20X3 $\quad$$\quad$ $270 000 31 December 20X6 $\quad$$\quad$ $240 000 31 December 20X8 $\quad$$\quad$ $360 000 The group applies the cost model.The carrying amount of the land immediately before control date is $40 000. What is the correct consolidation data adjustment entry for 31 December 20X6?

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows: Capital \ 500000 Reserves \ 100000 Retained profits \ 150000 Liabilities \ 50000 Rose paid $850 000 for the shares in Jeannie. In the 20X3-4 financial year, Jeannie made $75 000 in profits. Which of the following correctly describes the accounting procedures that will arise as a result of the business combination?

Wholly owned Subsidiary has the following balances at control date 20X1: Capital \ 500000 Asset revaluation reserve \ 200000 Retained profits \ 100000 Parent paid $900 000 for the shares of Subsidiary.The tax rate is 30%. Subsidiary assets are at fair value except for land, which the Subsidiary measures at cost and group policy is for revaluation.The land at cost is $60 000 and the fair value is $150 000. In the consolidation there will be a deferred tax liability of $27 000.

The substitution elimination entry may stay unchanged for several or more years after control date.

Judith Ltd.took control of Athol Ltd on 1 January 20X5.Athol does not depreciate buildings but Judith group does.The building is shown by Athol at cost at $500 000.The Judith group depreciation rate for buildings is 10% p.a.The tax rate is 30%. What would be the consolidation data adjustment entry for 31 December 20X5?

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was: 1 January 20X0 $\quad$$\quad$$\quad$ $100 000 31 December 20X3 $\quad$$\quad$ $270 000 31 December 20X6 $\quad$$\quad$ $240 000 31 December 20X8 $\quad$$\quad$ $360 000 The subsidiary applies the cost model and the group applies the revaluation model.The carrying amount of the land immediately before control date is $40 000. What is the correct consolidation data adjustment entry for 31 December 20X3?

April Ltd owns 100% of the issued share capital of Sun Ltd.During the year ended 31 December 20X1 Sun Ltd declared and paid a dividend of $850 000 out of post acquisition profits.Which combination of amounts correctly shows the total amount of dividend revenue, if any, in April Ltd's financial statements and in its consolidated financial statements?

Rose Ltd acquired all the equity of Jeannie Ltd on 1 July 20X3.At that time the fair value/financial position of Jeannie was as follows: Capital \ 500000 Reserves \ 100000 Retained profits \ 150000 Liabilities \ 50000 Rose paid $500 000 for the shares in Jeannie. In the 20X3-4 financial year, Jeannie made $75 000 in profits. Which of the following correctly describes the accounting procedures that will arise as a result of the business combination?

Assets of Argus Ltd include a plot of land purchased for $40 000.On 1 January 20X0 Argus became a subsidiary of Cyclops Ltd.The land was sold on 30 March 20X9 for $350 000.The land's fair value at the following dates was: 1 January 20X0 $\quad$$\quad$$\quad$ $100 000 31 December 20X3 $\quad$$\quad$ $270 000 31 December 20X6 $\quad$$\quad$ $240 000 31 December 20X8 $\quad$$\quad$ $360 000 The group applies the cost model.The carrying amount of the land immediately before control date is $40 000. What is the profit on sale of land attributable to the group in 20X9?