On 1 July 2014 Padda Ltd acquired all the issued shares (cum div) of Slang Ltd. At this date the statement of financial position of Slang Ltd included the following information:
|Carrying amount||Fair value|
|Cash||$ 7 500||$ 7 500|
|Receivables||22 800||22 800|
|Inventories||22 500||28 500|
|Plant and Equipment||300 000||264 600|
|Accumulated depreciation – plant and equipment||(38400)|
|Total assets||$321 600|
|Dividend payable||12 000||12 000|
|Provisions||28 800||28 800|
|Share capital (180 000 shares)||180 000|
|General reserve||34 800|
|Retained earnings||66 000|
|Total equity and liabilities||$321 600|
The following information relate to the acquisition on 1 July 2014:
- In exchange for the shares in Slang Ltd, Padda Ltd gave the following as consideration:
- 75 000 shares in Padda Ltd, each share having a fair value of $2.00 per share.
- Cash of $60 000.
- Artworks having a fair value of $90 000.
- Padda Ltd incurred legal and accounting costs of $7 500 and share issue costs of $6 000.
- The plant and equipment was considered to have a further 10-year life and is depreciated on a straight-line basis.
- The goodwill on hand at 1 July 2014 was written off as the result of an impairment test conducted in June 2016.
- All the inventories on hand at 1 July 2014 were sold by 30 June 2015.
- The dividend on hand at 1 July 2014 was paid in August 2014.
- The assets recognised by Slang Ltd did not include an internally generated patent of Slang Ltd that was valued by Padda Ltd at $15 000. Its useful life was considered to be 5 years, with benefits being received equally over that period.
- In January 2018, Slang Ltd paid a bonus dividend of $60 000, being one share for every three shares held, the dividend being paid from retained earnings on hand at 1 July 2014.
- The tax rate is 30%.
(a) Prepare the acquisition analysis on 1 July 2014.
(b) Prepare the consolidation journal entries for Padda Ltd’s group at 1 July 2014 and at 30 June 2019.
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