Q1. Range Ltd acquired a business for the following consideration: – Cash The business being acquired had the following assets and liabilities as reported in the balance sheet (there were no contingent liabilities): – Land—Carrying amount Fair value $50000 $90 000 $150 000 – Shares in Range Ltd—Fair value $60 000 (Hint: it is the fair value of the consideration that is relevant) Liabilities – Bank loan – Creditors Assets – Plant and equipment – Motor vehicle $50 000 $30 000 $150 000 $30 000 – (the plant and equipment and motor vehicle have fair value of $170 000 and $30 000, respectively) HOW MUCH GOODWILL WAS ACQUIRED? Q2. On 1 January 2018, Bad Ltd acquired all the assets and liabilities of Wolf Ltd. Wolf Ltd has a number of operating divisions, including one whose major industry is the manufacture of toy trains, particularly models of trains of historical significance. The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired goodwill of $240 000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date. • At 31 December 2020, the carrying amounts of the assets of the toy train division were: • There is a declining interest in toy trains because of the aggressive marketing of computer-based toys, so the management of Bad Ltd measured the value in use of the toy train division at 31 December 2020, determining it to be $475 000. • Required Prepare the journal entries to account for the impairment loss at 31 December 2020. Prepare the journal entries as above but now assuming the value in use of the train division at 31 December 2020 was determined to be $423 000.
Q1. Range Ltd acquired a business for the following consideration:
– Cash
The business being acquired had the following assets and liabilities as reported in the
– Land—Carrying amount Fair value
$50000
$90 000
$150 000 – Shares in Range Ltd—Fair value
$60 000 (Hint: it is the fair value of the consideration that is relevant)
Liabilities
– Bank loan
– Creditors Assets
– Plant and equipment
– Motor vehicle
$50 000
$30 000
$150 000 $30 000
– (the plant and equipment and motor vehicle have fair value of $170 000
and $30 000, respectively) HOW MUCH
Q2. On 1 January 2018, Bad Ltd acquired all the assets and liabilities of Wolf Ltd. Wolf Ltd has a number of operating divisions, including one whose major industry is the manufacture of toy trains, particularly models of trains of historical significance. The toy trains division is regarded as a CGU. In paying $2 million for the net assets of Wolf Ltd, Bad Ltd calculated that it had acquired goodwill of $240 000. The goodwill was allocated to each of the divisions, and the assets and liabilities acquired measured at fair value at acquisition date.
• At 31 December 2020, the carrying amounts of the assets of the toy train division were:
• There is a declining interest in toy trains because of the aggressive marketing of computer-based toys, so the management of Bad Ltd measured the value in use of the toy train division at 31 December 2020, determining it to be $475 000.
• Required
Prepare the
Prepare the journal entries as above but now assuming the value in use of the train division at 31 December 2020 was determined to be $423 000.
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