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Determine the gain on bargain purchase or goodwill as at acquisition date using the full goodwill

Question 4 (35 Marks) Part A (30 Marks) At 1 July 2011, White Ltd acquired 80% of the share capital of Pages Ltd for $290,000 (cum div.). At this date the statement of financial position of Pages Ltd, including comparative information on fair values for assets, was as shown as follows. Carrying amount Fair value Current assets Inventory 60,000 65,000 Receivables 40,000 Allowance for doubtful debts 5,000 35,000 35,000 Total current assets 95,000 Non-current assets Plant and machinery (at cost) 200,000 Accumulated depreciation125,000 75,000 90,000 Vehicles (at cost) 80,000 Accumulated depreciation 10,000 70,000 75,000 Buildings (at cost) 120,000 Accumulated depreciation 5,000 115,000 115,000 Trademark (at valuation) 100,000 100,000 Other assets 40,000 40,000 Goodwill 20,000 Total non-current assets 420,000 Total assets515,000 Equity Share capital 200,000 Asset revaluation surplus 50,000 Retained earnings50,000 Total equity 300,000 Current liabilities Accounts payable 40,000 Dividend payable 20,000 Total current liabilities 60,000 Non-current liabilities Debentures155,000 Total non-current liabilities 155,000 Required: 1. Determine the gain on bargain purchase or goodwill as at acquisition date using the partial goodwill method. (2 marks) 2. Determine the gain on bargain purchase or goodwill as at acquisition date using the full goodwill method. Assume the fair value of the Non-controlling interest at 1 July 2011 was $67,000. (3 marks) 3. Prepare the consolidation journal entries for White Ltd using the full goodwill method at 1 July 2011, immediately after acquisition. (7 marks) 4. Prepare the consolidation journal entries for White Ltd using the full goodwill method at 30 June 2014. (18 marks) Total liabilities215,000 Total equity and liabilities515,000 At 1 July 2011, the depreciable assets had the following remaining useful lives: Plant and machinery 5 years Vehicles 10 years Trademark 100 years Buildings 10 years All the inventory on hand at 1 July 2011 was sold by Pages Ltd by 30 June 2012. Adjustments for differences between fair values and carrying amounts at acquisition date are made on consolidation.

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