Question

On 1/1/2017 Zamboor company purchased 100 % of Al Otaibi company by SR 500,000 , and...

On 1/1/2017 Zamboor company purchased 100 % of Al Otaibi company by SR 500,000 , and paid SR 30,000 for commission and consulting expenses and SR 20.000 indirect expenses for registering. The balance sheet of Zamboor and Al Otaibi company on 31/12/2016 before of purchase was:

particulars

Zamboor

Al Otaibi (book value)

Al Otaibi (fair value )

Cash

Account receivables

Inventories

  

600,000

400,000

450,000

  

25,000

300,000

100,000

    

25,000

340,000

150,000

Total assets

1.450.000

  425.000

  515.000

Account payables

Capital

Add. Capital

200,000

700,000

550,000

50,000

200,000

175,000

65,000

Total liabilities

1.450.000

  425.000

  

Requirements:

From the information mentioned above, Use purchase method to Prepare consolidated Balance Sheet at Date of Acquisition and fill in the blanks in the table of consolidated sheet.

Particulars

Zamboor

Al Otaibi (book value)

Consolidation adjustment

Dr                   Cr

Consolidation financial

Cash

Account receivables

Inventories

Goodwill

Investment

( )

400,000

450,000

( )

25,000

300,000

100,000

   

( )

( )

( )

   

Total assets

1.430.000

  425.000

( )

Account payables

Capital

Add. Capital

800,000

2,700,000

950,000

50,000

200,000

175,000

( )

1430000

425,000

( )

( )

( )

10 points   

Homework Answers

Answer #1
Particulars Zamboor Al Otaibi (book value) Consolidation adjustment Consolidation financial
Dr Cr
Cash 0 25,000 0 25,000
Account receivables 4,00,000 3,00,000 40000 7,40,000
Inventories 4,50,000 1,00,000 50000 6,00,000
Goodwill 0 0 100000 1,00,000
Investment 0
Total assets 1430000 425000 18,55,000
Account payables 8,00,000 50,000 15000 8,65,000
Capital 27,00,000 2,00,000 29,00,000
Add. Capital 9,50,000 1,75,000 11,25,000
Total Laibilities 1430000 425000 18,55,000
Working Note:-
Goodwill = (Purchase price-Book Value)+Expenses for Acquisition
= (500000-450000)+50000
= 100000
Note : All assets and liabilites are acquired at fair value
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