John Itd acquired its 70% interest in Stan Itd on 30 June 2019 for $700 000, when all assets of Stan Itd were fairly valued, except for land that was undervalued by $50,000. Share capital and reserves of Stan Itd were Share capital $500 000 Retained earnings $300 000 The management of john Itd measures any non-controlling interest (NCI) in Stan Itd at fair value. John Itd has investment in other companies. Tax rate is 30%. Reporting date is 30 June. 1. Prepare an acquisition analysis at 30 June 2019, to determine goodwill or gain on bargain purchase at acquisition. 2. Prepare all consolidation/elimination journals as at 30 June 2019. 3. For the financial year ending 30 June 2020, stan Itd paid $5,000 in management fees to john Itd and has a balance of $1,000 for management fees payable at year end. Management fees payable at the beginning of the year was $500. Prepare the consolidation elimination journal entries for intra-group service for the year ending 30 June 2020. 1. Acquisition Analysis Stan LTD Jhon LTD NCI 70% interest 30% interest FairValue of consideration NCI at fair value (700,000 *30/70) FVINA assumed Share capital at acquisition date Retain earnings at acquisition date Goodwill at acquisition

John Itd acquired its 70% interest in Stan Itd on 30 June 2019 for $700 000, when all assets of Stan Itd were fairly valued, except for land that was undervalued by $50,000. Share capital and reserves of Stan Itd were Share capital $500 000 Retained earnings $300 000 The management of john Itd measures any non-controlling interest (NCI) in Stan Itd at fair value. John Itd has investment in other companies. Tax rate is 30%. Reporting date is 30 June. 1. Prepare an acquisition analysis at 30 June 2019, to determine goodwill or gain on bargain purchase at acquisition. 2. Prepare all consolidation/elimination journals as at 30 June 2019. 3. For the financial year ending 30 June 2020, stan Itd paid $5,000 in management fees to john Itd and has a balance of $1,000 for management fees payable at year end. Management fees payable at the beginning of the year was $500. Prepare the consolidation elimination journal entries for intra-group service for the year ending 30 June 2020. 1. Acquisition Analysis Stan LTD Jhon LTD NCI 70% interest 30% interest FairValue of consideration NCI at fair value (700,000 *30/70) FVINA assumed Share capital at acquisition date Retain earnings at acquisition date Goodwill at acquisition

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 23E

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H1.
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