Prepare the consolidation elimination journal entries

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Reference no: EM132669976

On 1 July 2017, Sun Ltd acquired all the issued capital of Moon Ltd for a cash payment of $710 000 when the equity of Moon Ltd was:

Share capital $580,000 Retained earnings $ 50,000

At 1 July 2017, all assets of Moon Ltd were fairly valued, with the exception of an item of plant, with a carrying amount of $330 000, but a fair value of $390 000. The plant was initially acquired by Moon Ltd on 1 July 2013 for $550 000 when it had an estimated useful life of 10 years, with no residual value.Tax rate is 30%. Sun Ltd also has small shareholdings in other companies.

Problem 1: Prepare an acquisition analysis and determine the amount of goodwill or gain on bargain purchase at acquisition.

Problem 2: Prepare the acquisition elimination journal entries for consolidation as at 30 June 2020.

Problem 3: Goodwill has been impaired by $10 000 for the year ending 30 June 2020. Previous impairments to goodwill recorded in prior years total $8 000.Prepare the consolidation elimination journal entries for the year ending 30 June 2020.

Problem 4: Moon Ltd is charged management fees every month by Sun Ltd. During the year ending 30 June 2020, Moon Ltd paid a total of $20 800 in management fees to Sun Ltd.Moon Ltd's management fee payable balance was $6 100 at 30 June 2019, but this had dropped to $4 200 on 30 June 2020. Prepare the consolidation elimination journal entries for the year ending 30 June 2020.

Reference no: EM132669976

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