On 1 July 2014 Padma Ltd acquires 25 percent of the issued capital of Jamuna Ltd for a cash consideration of $360 000. At the date of acquisition, the shareholders’ equity of Jamuna Ltd is: Share capital $450 000 Retained earnings $300 000 Total shareholders’ equity 750 000 Additional information • On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July 2014. • For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 000. • For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 000. • Assume a tax rate of 30% is assumed Required Apply equity method of accounting to: (a) Calculate the amount of goodwill at the date of acquisition. (b) Prepare the journal entries for the year ending 30 June 2015 . (c) Prepare the journal entries for the year ending 30 June 2016.
On 1 July 2014 Padma Ltd acquires 25 percent of the issued capital of Jamuna Ltd for a cash consideration of $360 000.
At the date of acquisition, the shareholders’ equity of Jamuna Ltd is:
Share capital $450 000
Total shareholders’ equity 750 000
Additional information
• On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240 000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July 2014.
• For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 000.
• For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 000.
• Assume a tax rate of 30% is assumed
Required
Apply equity method of accounting to:
(a) Calculate the amount of
(b) Prepare the
(c) Prepare the journal entries for the year ending 30 June 2016.
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