Prepare consolidation worksheet adjustments entries at June

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Question - On 1 July 2016, Tuff Ltd acquired all the issued shares of Dogg Ltd for $176 800. At this date the equity of Dogg Ltd consisted of share capital of $80 000 and retained earnings of $68 800. All the identifiable assets and liabilities of Dogg Ltd were recorded at amounts equal to fair value except for:

 

Carrying amount

Fair value

Patent

$60,000

$72,000

Plant (net of $40,000 depreciation)

40,000

48,000

Inventory

21,600

28,000

The patent was considered to have an indefinite life. It was calculated that the plant had a further life of 10 years, and was depreciated on a straight-line basis. All the inventory was sold by 30 June 2017. In June 2017, Dogg Ltd conducted an impairment test on the patent, as it was considered to have an indefinite life, and the goodwill. As a result, the goodwill was considered to be impaired by $1200. In May 2017, Dogg Ltd transferred $20 000 from the retained earnings on hand at 1 July 2016 to a general reserve. The tax rate is 30%.

Required -

a) Do the acquisition analysis.

b) Prepare the consolidation worksheet adjustments entries at 1 July 2016.

c) Prepare the consolidation worksheet adjustments entries at 30 June 2017.

Reference no: EM132618853

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