Question

On 1 January 2017, Dark Ltd acquired all the issued shares (cum div.) of Sam Ltd...

On 1 January 2017, Dark Ltd acquired all the issued shares (cum div.) of Sam Ltd for

$820 000. At that date, the equity of Sam Ltd was recorded at:

                                    Share capital               $500 000

                                    Reserves                      200 000

                                    Retained earnings       50 000

On 1 January 2017, the records of Sam Ltd also showed;

                           Carrying amount         Fair value

Land                  $30000                        $ 55000

Further Sam Ltd had a dividend payable of $10 000, the dividend to be paid in March 2017. All other assets and liabilities were carried at amounts equal to their fair values.

Required: Prepare the consolidation worksheet entries on 1 January 2017, immediately after combination (tax rate of 30%)

Part A: Acquisition analysis :

_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

_______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________________________________________________________________________________________

Part B: Business combination valuation entries (2.5 marks):

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Part C: Pre-acquisition entries (3.5marks):

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