Reference no: EM133434326
Question
Bihar Ltd is a giant mining company based in Western Australia. As part of its expansion plans, the directors have recently considered some strategic decisions to acquire shares in two other businesses: Amida Ltd and BW Ltd. Amida Ltd is a newly formed mining company in Bundaberg, and BW LTD is a giant apparel company which holds several local brands with retail shops across metropolitan cities in Sydney, Melbourne and Brisbane. The progress of the business acquisitions is detailed below.
Amida Ltd - the negotiation is still going on. Bihar Ltd is to acquire 40% of voting shares in Amida Ltd, where the balance of 60% voting shares is equally owned by the founding shareholders, Mr and Mrs Ruch. As Mr & Mrs Ruch are new to the mining business, they have given 4 out of 6 seats available on the board of directors to Bihar Ltd so they can impart their experiences in any decisions of Amida Ltd. Bihar Ltd takes the lead in all decisions made for the business operations, but Mr & Mrs Ruch holds the other two seats in the board and are charged to monitor the business closely. The understanding is that once Mr & Mrs Ruch become familiar with the business operations, then they will take over the decision making responsibility.
BW Ltd - Bihar Ltd has finalised this deal and acquired 100% of the voting shares in BW Ltd on 1 July 2022. All the identifiable net assets of BW Ltd were recorded at fair value at the date of acquisition, except for inventory and plant, that had fair values of $5,000 and $12,000 higher than their carrying amount, respectively. The goodwill in BW Ltd's books was impaired by half for the year ended 30 June 2023. All of the inventory was sold to external parties by 30 June 2023. The plant has a further 5-year life and is to be depreciated on a straight-line basis.
On 1 July 2022, the financial information of the two companies was as follows:
| |
Bihar Ltd Ltd |
|
BW Ltd |
| |
$ |
|
$ |
| Share capital |
450,000 |
|
200,000 |
| Retained earnings 1 July 2022 |
150,000 |
|
130,300 |
| Current liabilities |
171,000 |
|
64,000 |
| Non-current liabilities |
76,500 |
|
95,000 |
| |
847,500 |
|
489,300 |
| Cash & cash equivalents |
55,000 |
|
72,000 |
| Accounts receivable |
47,000 |
|
56,000 |
| Inventory |
45,000 |
|
106,300 |
| Land and buildings - at cost |
400,000 |
|
|
| Accumulated depreciation - buildings |
(120,000) |
|
|
| Plant - at cost |
|
|
400,000 |
| Accumulated depreciation - plant |
|
|
(160,000) |
| Goodwill |
|
|
15,000 |
| Investment in BW Ltd |
420,500 |
|
|
| |
847,500 |
|
489,300 |
It is determined that Bihar Ltd has gained 'control' over BW Ltd as of date of acquisition in accordance with AASB 10 Consolidated Financial Statements.
- Prepare the consolidation worksheet entries in accounting for the following items in the consolidated financial statements of Bihar Ltd group for the year ended 30 June 2023:
- inventory
- plant
- goodwill