1)The fair value of Danute's net assets differed from its carrying values at 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. Required: Calculate the goodwill arising on acquisition at 1 July 2015

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
30,000
16,000
Total Assets
84,920
32,000
Equity and liabilities
Ordinary shares of $1 each
Retained eamings
Revaluation reserve
40,000
4,000
17,720
7,200
64,920
8,800
12,800
Non-current liabilities
10% loan notes
10,000
Current Liabilities
20,000
9,200
Total Equity and Liabilities
84,920
32,000
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 $$ million in excess of its net book value. Plant had 4
years remaiming at the date of acquisition. The group depreciation policy is
to charge depreciation on a proportionate basis and should be included in
cost of sales. No adjustment was made for this in Danute's fmancial
statements.
2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed
per IAS 16) at each reporting date. Danute accounts for its non-current
assets at historical cost. At the acquisition date, Danute'ş land and buildings
had a fair value of $2 million greater than their book value and at 31
December 2015 this had increased by a further $400,000 (ignore any
additional depreciation).
3)Ausra's policy is to value the non-controlling interest at fair value at the
date of acquisition. The fair value of the non-controlling interests at the date
of acquisition is $7.3 mill ion.
4)An impairment test carried out on 31 December 2015 concluded that
consolidated goodwill was impaired by $780,000.
Required:
Calculate the goodwill arising on acquisition at 1 July 2015
Transcribed Image Text:30,000 16,000 Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each Retained eamings Revaluation reserve 40,000 4,000 17,720 7,200 64,920 8,800 12,800 Non-current liabilities 10% loan notes 10,000 Current Liabilities 20,000 9,200 Total Equity and Liabilities 84,920 32,000 The following information is relevant: 1)The fair value of Danute's net assets differed from its carrying values at 1 July 2015. Plant was $$ million in excess of its net book value. Plant had 4 years remaiming 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 fmancial 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'ş 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 mill ion. 4)An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000. Required: Calculate the goodwill arising on acquisition at 1 July 2015
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 $1,160,000. 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 fimancial
statements of both companies are as follows:
r Snip
Statement of Comprehensive Income for the year ended 31
December 2015
Ausra
S 00
120,000
Danute
S 000
48,000
Revenue
Costof sales
Gross profit
Operating expenses
Profit from operations
Other income
(84,000)
36,000
(11,900)
24,100
(40,000)
8,000
(400)
7,600
300
Fimance costs
(1,200)
6,400
Profit before tax
24,400
Income tax expense
Profit for the year
(6,000)
18,400
(1,200)
5,200
Statements of Financial Position at 31 December 2015
Ausra
Danute
S 000
S 000
Non-current assets:
Property, plant and equipment
38,640
16,000
Investments
16,280
54,920
16,000
Current assets
Inventory
Receivables
11,240
13,600
5,160
6,450
7,355
Bank
2,195
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 $1,160,000. 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 fimancial statements of both companies are as follows: r Snip Statement of Comprehensive Income for the year ended 31 December 2015 Ausra S 00 120,000 Danute S 000 48,000 Revenue Costof sales Gross profit Operating expenses Profit from operations Other income (84,000) 36,000 (11,900) 24,100 (40,000) 8,000 (400) 7,600 300 Fimance costs (1,200) 6,400 Profit before tax 24,400 Income tax expense Profit for the year (6,000) 18,400 (1,200) 5,200 Statements of Financial Position at 31 December 2015 Ausra Danute S 000 S 000 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 54,920 16,000 Current assets Inventory Receivables 11,240 13,600 5,160 6,450 7,355 Bank 2,195
Expert Solution
steps

Step by step

Solved in 4 steps with 6 images

Blurred answer
Knowledge Booster
Capital Gains and Losses
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
  • SEE MORE 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