Melissa Ltd purchased all the issued shares of Soren Ltd for $1115000 on 1 July 2020 when the equity of Soren Ltd was as follows;
| Share capital | 446000 |
| General reserve | 334500 |
| Asset revaluation surplus | 167250 |
At this date, Soren Ltd had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the followings;
| Account | Cost | Carrying Amount | Fair value | Further life(Years) |
| Inventories | $33,500 | $36,900 | ||
| Land | $84,000 | $92,000 | ||
| Furniture | $130,000 | $104,000 | $125,000 | 10 |
| Contingent Liability | Soren Ltd identified at acquisition date a lawsuit where Soren Ltd was sued by a former supplier with the Fairvalue of: | $13,000 | ||
| Unrecorded Asset | Soren Ltd had unrecorded and internally generated Patent with the FairValue of: | $33,000 | ||
| Unrecorded Asset | Soren Ltd had unrecorded and internally generated in-process research and development with the FairValue of: | $25,000 | ||
40% of inventory were sold by 30 June 2021. Further life of the assets are listed on the above table. Tax rate:30%.
Required
- Prepare the acquisition analysis at acquisition date.
- Prepare adjusting journal entries for the consolidation worksheet at acquisition date.
- Prepare adjusting journal entries for the consolidation worksheet on 30 June 2021.
If Melissa Ltd purchased just 93% of the issued shares of Soren Ltd , partial goodwill method is under use and the NCI at acquisition date is measured based on the proportionate share of the identifiable assets and liabilities in Soren Ltd.
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 2021. Assume a profit for Soren Ltd for the year ended 30 June 2021 of $1160000 and no other changes in Soren Ltd’s equity since the acquisition date.
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