Please assist that if on 1 July 2014 Padma Ltd acquires 25 per cent 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. Thanks

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

Please assist that if on 1 July 2014 Padma Ltd acquires 25 per cent 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. Thanks

On 1 July 2014 Padma Ltd acquires 25 per cent 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
Retained earnings
Total shareholders' equity
$450 000
$300 000
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
Transcribed Image Text:On 1 July 2014 Padma Ltd acquires 25 per cent 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 Retained earnings Total shareholders' equity $450 000 $300 000 750 000 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
Expert Solution
Step 1

Definition:

Equity method of accounting:- This method is used when one company invests in another company and has an important role in its investment structure. In this, the company acquires a portion of ownership over another's income.

steps

Step by step

Solved in 4 steps with 5 images

Blurred answer
Knowledge Booster
Income Statement Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education