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%.


  1. Prepare the acquisition analysis at acquisition date.
  2. Prepare the business combination valuation entries and pre-acquisition entry at acquisition date.
  3. Prepare the journal entry to recognise NCI at acquisition date.
  4. 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.
  5. Explain how the step 1 to 4 will change if the full goodwill method is used.

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