On 1 July 2019 Ethan Ltd acquired 90% the issued shares of Davis Ltd for $ 3,832,000. The equity of Davis Ltd at this date consisted of:
Share capital: $ 1,341,000
Retained earnings: $ 575,000
General reserve: $ 460,000
All the identifiable assets and liabilities of Davis Ltd were recorded at amounts equal to their fair values at acquisition date except for the following:
| Account | Cost | Carrying Amount | Fair Value | Future life-in Year |
| Inventories | 575,000 | 1,035,000 | ||
| Land | 1,150,000 | 2,070,000 | ||
| Vehicle | 1,609,000 | 1,341,000 | 2,414,000 | 5 |
| Fittings | 60,425 | 56,950 | 63,900 | 5 |
| Liabilities (Contingent) | 0 | 50,000 |
All inventories on hand at 1 July 2019 are sold by 30 June 2020. Further life of the assets are listed on the above table. Ethan Ltd uses the partial goodwill method.
Tax rate 30%.
Required:
- Prepare the acquisition analysis at acquisition date.
- Prepare the business combination valuation entries and pre-acquisition entry at acquisition date.
- Prepare the journal entry to recognise NCI at acquisition date.
- Prepare the consolidation worksheet entries at 30 June 2020. Assume a profit for Davis Ltd for the year ended 30 June 2020 of $77,000.
- Explain how the step 1 to 4 will change if the full goodwill method is used.
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