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Green Ltd purchased 80 per cent of the issued capital of Maroon for consideration of $4...

Green Ltd purchased 80 per cent of the issued capital of Maroon for consideration of $4 000 000 and in the process gained control over Maroon Ltd on 1 July 2015. The fair value of the net assets of Maroon Ltd at purchase was represented by: Share capital 3 220 000 Retained earnings 740 000 Total 3 960 000 At acquisition date all the identifiable assets and liabilities of Maroon Ltd were recorded at amounts equal to fair value. At 1 July 2015, the fair value of the non-controlling interest was $1 000 000 and Maroon Ltd adopts the full goodwill method. At 30 June 2016, the equity of Maroon Ltd consisted of: Share capital 3 220 000 Retained earnings 860 000 Total 3 960 000 During the 2015–16 financial year Maroon Ltd recorded a profit of $120 000. Required: a. Prepare acquisition analysis b. Prepare the consolidated worksheet entries at 30 June 2016 for Swamp Ltd  

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Answer #1
a.) Acquisition analysis
Full Goodwill method
Fair Value of Maroon $ 5,000,000 (4,000,000 / 80% )
Fair value of identifable net assets $ 3,960,000
Goodwill $ 1,040,000 ( 5,000,000 - 3,960,000 )
b.) Consolidation Worksheet Entries
Debit $ Credit $
Goodwill        1,040,000
Investment in Maroon 4,000,000
Non-Controlling Interest 1,024,000
( 1,000,000 + ( 120,000 x 20% ) )
Retained earnings of Green Ltd        96,000
( 120,000 x 80% )
Share Capital- Maroon        3,220,000
Retained earnings-Maroon           860,000
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