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.