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|
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%.
- 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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