On 1 July 2010 Davis Ltd acquired all the share capital in Mitchell Ltd for $230,000 cash. At the date of acquisition Mitchell Ltd had a dividend payable of $40,000. The shares in Mitchell Ltd were acquired cum- dividend. As at the date of acquisition the balance sheet of Mitchell Ltd showed the following: Share capital 100,000 General reserve 35,000 Retained earnings 45,000 All of the identifiable assets and liabilities of Mitchell Ltd were recorded at fair value except for the following: Carrying amount Fair value $20,000 $45,000 Inventory 40,000 100,000 Machinery (Cost $150,000) Nil 5,000 Contingent liability The inventory was all sold by 30 June 2011. The machinery has a further 10 year useful life. The contingent liability was settled for $4,000 during the 2011 financial year. All fair value adjustments are performed on consolidation. The tax rate is 30%. On 30 June 2012, the consolidation entry required to the revalued inventory is:
On 1 July 2010 Davis Ltd acquired all the share capital in Mitchell Ltd for $230,000 cash. At the date of acquisition Mitchell Ltd had a dividend payable of $40,000. The shares in Mitchell Ltd were acquired cum- dividend. As at the date of acquisition the balance sheet of Mitchell Ltd showed the following: Share capital 100,000 General reserve 35,000 Retained earnings 45,000 All of the identifiable assets and liabilities of Mitchell Ltd were recorded at fair value except for the following: Carrying amount Fair value $20,000 $45,000 Inventory 40,000 100,000 Machinery (Cost $150,000) Nil 5,000 Contingent liability The inventory was all sold by 30 June 2011. The machinery has a further 10 year useful life. The contingent liability was settled for $4,000 during the 2011 financial year. All fair value adjustments are performed on consolidation. The tax rate is 30%. On 30 June 2012, the consolidation entry required to the revalued inventory is:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![On 1 July 201O Davis Ltd acquired all the share capital in Mitchell Ltd for $230,000 cash. At the date of
acquisition Mitchell Ltd had a dividend payable of $40,000. The shares in Mitchell Ltd were acquired cum-
dividend. As at the date of acquisition the balance sheet of Mitchell Ltd showed the following:
Share capital
100,000
General reserve
35,000
Retained earnings
45,000
All of the identifiable assets and liabilities of Mitchell Ltd were recorded at fair value except for the following:
Carrying amount
Fair value
$20,000
$45,000
inventory
40,000
100,000
Machinery (Cost $150,000)
Nil
5,000
Contingent liability
The inventory was all sold by 30 June 2011. The machinery has a further 10 year useful life. The contingent
liability was settled for $4,000 during the 2011 financial year. All fair value adjustments are performed on
consolidation. The tax rate is 30%.
On 30 June 2012, the consolidation entry required to the revalued inventory is:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd28f0492-e8cd-4969-bce9-6458b503582a%2F522a3fa4-b0d1-4979-8c53-2426351af529%2Fozu6kn4_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On 1 July 201O Davis Ltd acquired all the share capital in Mitchell Ltd for $230,000 cash. At the date of
acquisition Mitchell Ltd had a dividend payable of $40,000. The shares in Mitchell Ltd were acquired cum-
dividend. As at the date of acquisition the balance sheet of Mitchell Ltd showed the following:
Share capital
100,000
General reserve
35,000
Retained earnings
45,000
All of the identifiable assets and liabilities of Mitchell Ltd were recorded at fair value except for the following:
Carrying amount
Fair value
$20,000
$45,000
inventory
40,000
100,000
Machinery (Cost $150,000)
Nil
5,000
Contingent liability
The inventory was all sold by 30 June 2011. The machinery has a further 10 year useful life. The contingent
liability was settled for $4,000 during the 2011 financial year. All fair value adjustments are performed on
consolidation. The tax rate is 30%.
On 30 June 2012, the consolidation entry required to the revalued inventory is:
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