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The summarized statement of financial positions of A Ltd and B Ltd as at 31 December...

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Accounting

The summarized statement of financial positions of A Ltd and BLtd as at 31 December 2018 are as follows:

A Ltd

B Ltd

Non-Current Assets at book value

60,000

46,000

Investment in B Ltd

75,000

Current assets

Inventory

32,000

13,000

Receivables

27,000

17,000

Bank

1,000

2,000

195,000

78,000

Financed by:

Share capital (Sh 1ordinary shares)

100,000

50,000

Retained profits

70,000

12,000

170,000

62,000

Liabilities

25,000

16,000

195,000

78,000

A Ltd purchased the entire share capital of B Ltd on 31 December2018. The Non-Current Assets of B Ltd are considered to possess afair value of sh.54,000 but there are no material differencesbetween the book values and fair values of the remainingassets.

Required

  1. Calculate the goodwill arising on consolidation
  2. Prepare the consolidated statement of financial position of ALtd and it subsidiary as at 31 December 2018

Note: Ignore depreciation

Answer & Explanation Solved by verified expert
4.5 Ratings (746 Votes)

PRICE PAID $ 75,000.00
FAIR VALUE OF ASSETS(NET)
NON CURRENT ASSETS $ 54,000.00
INVENTORY $ 13,000.00
RECEIVABLES $ 17,000.00
BANK $   2,000.00
LESS:
LIABILITIES $ 16,000.00
NET ASSET $ 70,000.00
GOODWILL $ 5,000.00
CONSOLIDATE BALANCSHEET AS ON 31-12-2018
ASSETS
Non-Current Assets (60000+54000) $    114,000.00
Goodwill acquired in business combination $         5,000.00
Current assets
Inventory (32000+13000) $       45,000.00
Receivables (27000+17000) $       44,000.00
Bank (1000+2000) $         3,000.00
TOTAL ASSETS $ 211,000.00
EQUITY & LIABILITIES
Share capital (Sh 1ordinary shares) $    100,000.00
Retained profits $       70,000.00
Liabilities(25000+16000) $       41,000.00
TOTAL EQUITY AND LIABILITIES $ 211,000.00

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