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On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Profit for the year Statements of Financial Position at 31 December 2015 Trent assets: y. plant and equipment ents at assets ry ables Assets and liabilities y shares of $1 each d earnings ation reserve Rectangular Snip Ausra $ 000 18,400 urrent liabilities an notes Liabilities Cquity and Liabilities Ausra $ 000 38,640 16,280 54,920 11,240 13,600 5,160 30,000 84,920 40,000 17,720 7,200 64,920 20,000 84.920 Danute $ 000 5,200 Danute $ 000 16,000 16,000 6,450 7,355 2,195 16,000 32,000 4,000 8,800 12,800 10,000 9,200 32.000

On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Profit for the year Statements of Financial Position at 31 December 2015 Trent assets: y. plant and equipment ents at assets ry ables Assets and liabilities y shares of $1 each d earnings ation reserve Rectangular Snip Ausra $ 000 18,400 urrent liabilities an notes Liabilities Cquity and Liabilities Ausra $ 000 38,640 16,280 54,920 11,240 13,600 5,160 30,000 84,920 40,000 17,720 7,200 64,920 20,000 84.920 Danute $ 000 5,200 Danute $ 000 16,000 16,000 6,450 7,355 2,195 16,000 32,000 4,000 8,800 12,800 10,000 9,200 32.000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information is relevant: 1)The fair value of Danute's net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute's financial statements. 2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute's land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation). 3)Ausra's policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million. 4)An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000. 5)On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer. 6)During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute werereconciled at the year end with Danute owing $50,000. Required: Calculate the goodwill arising on the acquisition of Danute ww wm
Transcribed Image Text:The following information is relevant: 1)The fair value of Danute's net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute's financial statements. 2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute's land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation). 3)Ausra's policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million. 4)An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000. 5)On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer. 6)During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute werereconciled at the year end with Danute owing $50,000. Required: Calculate the goodwill arising on the acquisition of Danute ww wm
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Rect ular Snip Ausra S 000 Danute S 0 Profit for the year 18,400 5,200 Statements of Financial Position at 31 December 2015 Ausra S 000 Danute $ 00 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 54,920 16,000 Current assets Inventory 11,240 6,450 Receivables 13,600 5,160 30,000 7,355 2,195 16,000 Bank Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each Retained earnings 40,000 4,000 17,720 8,800 Revaluation reserve 7,200 64,920 12,800 Non-current liabilities 10% loan notes 10,000 Current Liabilities 20,000 84,920 9,200 32,000 Total Equity and Liabilities
Transcribed Image Text:On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Rect ular Snip Ausra S 000 Danute S 0 Profit for the year 18,400 5,200 Statements of Financial Position at 31 December 2015 Ausra S 000 Danute $ 00 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 54,920 16,000 Current assets Inventory 11,240 6,450 Receivables 13,600 5,160 30,000 7,355 2,195 16,000 Bank Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each Retained earnings 40,000 4,000 17,720 8,800 Revaluation reserve 7,200 64,920 12,800 Non-current liabilities 10% loan notes 10,000 Current Liabilities 20,000 84,920 9,200 32,000 Total Equity and Liabilities
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