Question

AFM311, Trimester 1 2014 Question 2: (16 marks) On 1 July 2008 S Ltd acquires 25% of the issued capital to C Ltd for a cash consideration of $60 000. At the date of acquisition, the shareholders' equity of C Ltd is: capital $75 000 Total shareholders' equity $50 000 $125 000 Additional Information On the date of acquisition, buildings have a carrying value in the accounts of C Ltd. of $40 000 and a market value of $50 000. The buildings have an estimated useful life of 10 years after 1 July 2008. (a) (b) For the year ending 30 June 2009 C Ltd. records an after tax profit of S15 000, from which it (c) For the year ending 30 June 2010 C Ltd records an after tax profit of $50 000, from which it (d) The tax rate is 30%. Reguired: [use the space provided below] pays a dividend of S5 000. pays a dividend of $25 000. Applying the equity method ofaccounting, calculate the amount of goodwill at the date of acquisition and prepare the jounal entries for the year ended 30 June 2009 and 30 June 2010 as required by AASB128

On 1 July 2008 S Ltd acquires 25% of the issued capital to C Ltd for a cash consideration of $60 000. At the date of acquisition, the shareholders’ equity of C Ltd is:

Additional Information:

(a) On the date of acquisition, buildings have a carrying value in the accounts of C Ltd. of $40 000 and a market value of $50 000. The buildings have an estimated useful life of 10 years after 1 July 2008.

(b) For the year ending 30 June 2009 C Ltd. records an after tax profit of $15 000, from which it pays a dividend of $5 000.

(c) For the year ending 30 June 2010 C Ltd records an after tax profit of $50 000, from which it pays a dividend of $25 000.

(d) The tax rate is 30%.

Required: [use the space provided below]

Applying the equity method of accounting, calculate the amount of goodwill at the date of acquisition and prepare the journal entries for the year ended 30 June 2009 and 30 June 2010 as required by AASB128.

Answer 1

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