Question 5 On 1 July 2020, Big Ltd acquired all the issued share capital of...
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Accounting
Question 5 On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows:
Big Ltd ($)
Small Ltd ($)
Assets
Cash
21,000
10,500
Accounts receivable
315,000
115,500
Land
420,000
210,000
Plant
1,680,000
1,050,000
Investment in Small Ltd
1,050,000
3,486,000
1,386,000
Liabilities
Accounts payable
126,000
63,000
Loans payable
840,000
315,000
Shareholders equity
Share capital
2,100,000
420,000
Retained earnings
420,000
588,000
3,486,000
1,386,000
Required:
a) Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. b) Prepare consolidation journal entries. c) What journal entry would the parent company Big Ltd record in its own accounting record for the acquisition of Small Ltd at the acquisition date?
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