Question

Tom Limited purchased all the equity of Jerry Limited on 30 June 2018. At that time the carrying value of the net assets of Jerry Limited was $581,000. This amount was made up in equity as follows: Share Capital $354,000; retained earnings $227,000. Jerry Limited has held some valuable land, purchased at $435,000, and inventory purchased at 72,000, but has not revalued land or inventory.

The land fair value at 30 June 2018 was $549,000 and the inventory fair value was $172,000. All other non-current assets are recorded at fair value.

Tom Limited paid cash consideration of $958,000 for Jerry Limited. Assuming the land and inventory have not been revalued in the controlling entity’s books, the eliminating entries to show the business combination of Tom Ltd group are as follows:

30 June 2018
Dr. Share Capital
Dr. Retained Earnings
Dr. BCVR
Dr. Goodwill	yyy
Cr. Investment in Jerry Ltd.
Dr. Land
Cr. BCVR
Cr. Deferred tax liability
Dr. Inventory
Cr. BCVR
Cr. Deferred tax liability

Enter the amount of yyy

Answer 1

Particulars	Dr.	Cr.
Share capital	$       3,54,000
Retained Earning	$       2,27,000
BCVR	$       2,14,000
Goodwill	$       1,63,000
Investment in Jerry LTd		$    9,58,000

Particulars	Book Value	Fair Value	BCVR
Land	$       4,35,000	$    5,49,000	$ 1,14,000
Inventory	$          72,000	$    1,72,000	$ 1,00,000
Total	$       5,07,000	$    7,21,000	$ 2,14,000