On 1 July 2019, Michelle Ltd acquired all the issued shares of Tracy Ltd, paying $250 000 cash. At that date, the financial statements of Tracy Ltd showed the following information. Share capital Retained earnings $100 000 100 000 All the assets and liabilities of Tracy Ltd were recorded at amounts equal to their fair values at the acquisition date, except some inventories recorded at $10 000 below their fair value. Also, Michelle Ltd identified at acquisition date a patent with a fair value of $40 000 that Tracy Ltd has not recorded in its own accounts. Required 1. Prepare the acquisition analysis at 1 July 2019. 2. Prepare the consolidation worksheet entries for Michelle Ltd's group at 1 July 2019. 3. Discuss how the answers for 1 and 2, above, would change if the Michelle Ltd paid only $200 000 cash for the shares in Tracy Ltd.

On 1 July 2019, Michelle Ltd acquired all the issued shares of Tracy Ltd, paying $250 000 cash. At that date, the financial statements of Tracy Ltd showed the following information. Share capital Retained earnings $100 000 100 000 All the assets and liabilities of Tracy Ltd were recorded at amounts equal to their fair values at the acquisition date, except some inventories recorded at $10 000 below their fair value. Also, Michelle Ltd identified at acquisition date a patent with a fair value of $40 000 that Tracy Ltd has not recorded in its own accounts. Required 1. Prepare the acquisition analysis at 1 July 2019. 2. Prepare the consolidation worksheet entries for Michelle Ltd's group at 1 July 2019. 3. Discuss how the answers for 1 and 2, above, would change if the Michelle Ltd paid only $200 000 cash for the shares in Tracy Ltd.

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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Question

On 1 July 2019, Michelle Ltd acquired all the issued
shares of Tracy Ltd, paying $250 000 cash. At that
date, the financial statements of Tracy Ltd showed
the following information.
Share capital
Retained earnings
$100 000
100 000
All the assets and liabilities of Tracy Ltd were
recorded at amounts equal to their fair values at
the acquisition date, except some inventories
recorded at $10 000 below their fair value. Also,
Michelle Ltd identified at acquisition date a patent
with a fair value of $40 000 that Tracy Ltd has not
recorded in its own accounts.
Required
1. Prepare the acquisition analysis at 1 July 2019.
2. Prepare the consolidation worksheet entries for
Michelle Ltd's group at 1 July 2019.
3. Discuss how the answers for 1 and 2, above, would
change if the Michelle Ltd paid only $200 000 cash
for the shares in Tracy Ltd.

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