Log in
Accounting
1
answer
0
watching
184
views

Parpare journal entry

d) On March 1, 20X7, Merk Ltd. acquired 2,000 shares of Hoi Co.for $60,000. This investment represents a 30% interest in Hoi. Merkhas significant influence. On November 30, 20X7, Hoi paid a $25,000dividend to its shareholders. At December 31, 20X7, Hoi’s shareswere valued at $40/share and Hoi reported net income of $150,000for the year. On April 15, 20X8, Merk sold the shares for $106,000.Both Merk and Hoi have February 28th year-ends.

Watch
1
answer
0
watching
184
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Jarrod Robel
Jarrod RobelLv2
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related questions

Question 3 (50 marks)
The following information is available for Heritage Limited:
1. The reporting period of Heritage Ltd ends on 30 June of every year.
The following balances are available as at 30 June 20x8
Land and building at cost 400 000
Accumulated depreciation on buildings at 01/07/20x7 12 000
Furniture at cost 80 000
Accumulated depreciation as at 01/07/20x7 10 000
Vehicles at cost 300 000
Accumulated depreciation as at 01/07/20x7 60 000
Investments as at 01/07/20x7 34 000
Bank 96 700
Trade and other receivables 20 000
Ordinary share capital 275 000
Preference share capital 280 000
Retained earnings as at 01/07/20x7 7 000
Replacement reserves 58 250
10% Bank loan 100 000
Payables 33 500
Additional information:
1. The buildings are occupied for the purposes of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 01 July 20x6, the land was valued at N$ 100 000 and buildings at N$ 300 000. Depreciation is written off on buildings at 4% per annum on the straight line method.
2. Furniture and vehicles were purchased on 01 July 20x6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on
Page 13 of 21
vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year still need to be done.
3. The value of the investments is valued at N$ 42 000 as at 30 June 20x8
4. Inventories consist as at 01 June 20x8 amounted to N$ 22 000. Inventories are measured at lower of cost (FIFO) and net realisable value.
5. Authorised share capital for Heritage Ltd is 400 000 ordinary shares at N$ 1,10 each and 200 000 8% preference shares at N$ 1,75 each. The company had already issued 250 000 ordinary shares at N$ 275 000 and 160 000 preference shares at N$ 280 000. The company had issued 25 000 shares at N$ 2,00 during the year. Preference share capital form part of equity.
6. The loan was entered into on 01 July 20x6 at an interest rate of 10% per annum. The loan is secured by a mortgage bond on land and buildings and is repayable in annual instalments of N$ 20 000 from 31 December 20x8.
7. Payables consist of the following:
Trade payables 6 000
Namibian company tax 3 000
Dividend payable 24 500
8. Profit for the year amounted to N$ 60 000.
9. On 30 March 20x8 a new vehicle with a cost price of N$ 55 000 was purchased for use in the delivery of goods to customers.
10. At 30 June 20x8, inventory worth N$ 4 000 were stolen.
Required:
1.1 Prepare the statement of financial position as at 30 June 20x8 to comply with the requirements of IFRS and Companies Act,
1.2 Prepare the following notes to accompany the financial statements and to comply with IFRS and Companies Act:
? Basis of presentation
? Statement of significant accounting policies
? Property, plant and equipment
? Financial assets
? Inventories
? Share capital and
? Non-current liabilities as at 30 june20x8; and
Page 14 of 21
1.3 The statement of changes in equity for the year ended 30 June 20x8 for Heritage Ltd to comply with the minimum requirements of the Companies Act of 2008 and International Financial Reporting Standards (IFRS). Comparative figures are required were necessary

Question 3 (50 marks)
The following information is available for Heritage Limited:
1. The reporting period of Heritage Ltd ends on 30 June of every year.
The following balances are available as at 30 June 20x8
Land and building at cost 400 000
Accumulated depreciation on buildings at 01/07/20x7 12 000
Furniture at cost 80 000
Accumulated depreciation as at 01/07/20x7 10 000
Vehicles at cost 300 000
Accumulated depreciation as at 01/07/20x7 60 000
Investments as at 01/07/20x7 34 000
Bank 96 700
Trade and other receivables 20 000
Ordinary share capital 275 000
Preference share capital 280 000
Retained earnings as at 01/07/20x7 7 000
Replacement reserves 58 250
10% Bank loan 100 000
Payables 33 500

Additional information:
1. The buildings are occupied for the purposes of the activities of the entity and are accounted for in terms of the cost model. At the date of acquisition, 01 July 20x6, the land was valued at N$ 100 000 and buildings at N$ 300 000. Depreciation is written off on buildings at 4% per annum on the straight line method. 2. Furniture and vehicles were purchased on 01 July 20x6 at N$ 80 000 and N$ 300 000 respectively. Depreciation is written off on furniture at 12,5% per year on cost and on


Page 13 of 21

vehicles at 20% per year on the diminishing balance method. The necessary write-offs for the current year still need to be done. 3. The value of the investments is valued at N$ 42 000 as at 30 June 20x8 4. Inventories consist as at 01 June 20x8 amounted to N$ 22 000. Inventories are measured at lower of cost (FIFO) and net realisable value. 5. Authorised share capital for Heritage Ltd is 400 000 ordinary shares at N$ 1,10 each and 200 000 8% preference shares at N$ 1,75 each. The company had already issued 250 000 ordinary shares at N$ 275 000 and 160 000 preference shares at N$ 280 000. The company had issued 25 000 shares at N$ 2,00 during the year. Preference share capital form part of equity. 6. The loan was entered into on 01 July 20x6 at an interest rate of 10% per annum. The loan is secured by a mortgage bond on land and buildings and is repayable in annual instalments of N$ 20 000 from 31 December 20x8. 7. Payables consist of the following:
Trade payables 6 000
Namibian company tax 3 000
Dividend payable 24 500
8. Profit for the year amounted to N$ 60 000. 9. On 30 March 20x8 a new vehicle with a cost price of N$ 55 000 was purchased for use in the delivery of goods to customers. 10. At 30 June 20x8, inventory worth N$ 4 000 were stolen.

Required:
1.1 Prepare the statement of financial position as at 30 June 20x8 to comply with the requirements of IFRS and Companies Act,
1.2 Prepare the following notes to accompany the financial statements and to comply with IFRS and Companies Act:
? Basis of presentation ? Statement of significant accounting policies ? Property, plant and equipment ? Financial assets ? Inventories ? Share capital and ? Non-current liabilities as at 30 june20x8; and


Page 14 of 21

1.3 The statement of changes in equity for the year ended 30 June 20x8 for Heritage Ltd to comply with the minimum requirements of the Companies Act of 2008 and International Financial Reporting Standards (IFRS). Comparative figures are required were necessary.

Question 1

On January 2, 2013, Potter Ltd. purchased 40% ontiago Ltd. for$900,000. At the acquisition date, Santiago’s balance sheet showedtotal shareholders’ equity of $1,500,000. Any acquisitiondifferential is to be allocated to Santiago’s equipment. At theacquisition date, the equipment had a remaining useful life of 10years. For the past 5 years, Santiago has paid annual dividends of$50,000 and will continue to do so in the future.

The following information has been extracted from Santiago’sincome statement:

2014 2013

Net income (loss) before extraordinaryitems $ (90,000) $ 450,000

Extraordinary gain (net oftax) __-___ 150,000

Net income(loss) $ (90,000) $ 600,000

Required:

Assume that Potter has significant influence. Prepare Potter’sjournal entries related to its investment in Santiago for 2013 and2014.

Question 2

On September 1, 2014, Sunshine Ltd. acquired all the assets(with the exception of cash) and liabilities of Moonbeam Ltd. Underthe terms of acquisition, Moonbeam shareholders received 3 Class ASunshine Ltd. shares plus $2.00 cash for every four shares ofMoonbeam. At the acquisition date, Sunshine’s Class A shares werevalued at $2.50 per share. Sunshine had agreed to cover Moonbeam’sestimated liquidation costs of $10,000. The $1,500 of cash inMoonbeam’s bank at the acquisition date will go towards payingthese costs. The statements of financial position at theacquisition date are as follows:

Sunshine Moonbeam Ltd.

Ltd. Cost FMV

Cash $ 30,000$ 1,500 $ 1,500

Accountsreceivable 52,500 28,500 26,250

Inventory 78,000 39,750 48,000

Property and equipment(net) 449,250 224,250 248,250

Kucey Ltd. bonds(investment) _67,500 _27,000 28,500

677,250 321,000

Accountspayable 117,000 114,000 114,000

Loanpayable ___-___ _60,000 60,000

117,000 174,000

Share capital issued at$1 450,000 120,000

Retainedearnings 110,250 _27,000

560,250 147,000

$677,250 $321,000

Items not reflected in Moonbeam’s statement of financialposition:

Contingent liability related to a loan guarantee was reported inthe notes to the financial statements and has a fair value of$2,000.

Moonbeam had expensed $15,000 in research and development costsin the past year. At the acquisition date, Sunshine has determinedthat the value of the research in progress is $3,000.

Sunshine’s statement of financial position does not include$5,000 in fees for valuation and accounting advice related to theacquisition of Moonbeam. Sunshine expects to pay these feesshortly.

Required:

1) Prepare the acquisition analysis and calculate thegoodwill.

2) Prepare all the journal entries in Sunshine’s books to recordthe acquisition of Moonbeam.

3) Prepare Sunshine’s statement of financial positionimmediately following the acquisition.

Question 3

On May 1, 2013, Peat Co. purchased all of Sorbet Ltd.’s issuedcommon shares for $630,000. At the acquisition date, Sorbet’sfinancial statements included the following balances:

Sharecapital $400,000

Retainedearnings 210,000

Goodwill 10,000

At the acquisition date, Sorbet’s identifiable assets andliabilities were equal to their fair values, except in the case ofinventory that had a book value of $80,000 and a fair value of$86,000, and equipment that had a book value of $360,000 and a fairvalue of $370,000. The equipment was originally purchased for$480,000. At the acquisition date, the equipment had a remaininguseful life of 5 years and was amortized using the straight-linemethod. All the inventory that Sorbet had on hand at theacquisition date was sold by October 2013. Sorbet’s goodwill hasnot shown indications of impairment. Both Peat and Sorbet haveApril 30th year-ends and did not have any intercompanysales with each other.

The financial statements for Peat and Sorbet at April 30, 2015are presented on the following pages.

Statement of Financial Position

April 30, 2015

Peat Co. SorbetLtd.

Assets:

Current assets:

Cash $ 52,000 $ 161,600

Accountsreceivable 100,000 80,000

Inventory 120,000 170,000

272,000 411,600

Non-current assets:

Equipment,net 558,000 368,000

Furniture and fixtures,net 51,000 51,600

Investment in SorbetLtd. 630,000 -

Goodwill ___-___ 10,000

1,239,000 429,600

Totalassets $1,511,000 $841,200

Liabilities and shareholders’ equity:

Current liabilities:

Accountspayable $ 69,000 $ 19,600

Non-current liabilities:

Loanpayable 22,000 32,000

Totalliabilities 91,000 51,600

Shareholders’ equity:

Sharecapital 1,000,000 400,000

Retainedearnings 420,000 389,600

1,420,000 789,600

Total liabilities and shareholders’equity $1,511,000 $841,200

Condensed Statement of Income

For the year ended April 30, 2015

Peat Co. SorbetLtd.

Sales $250,000 $180,000

Expenses 170,000 130,000

Netincome $ 80,000 $ 50,000

Statement of Changes in Equity

For the year ended April 30, 2015

Peat Co. SorbetLtd.

Sharecapital $1,000,000 $400,000

Retained earnings, May 1,2014 340,000 339.600

Netincome 80,000 50,000

Retained earnings, April 30,2015 420,000 389,600

Total shareholders’equity $1,420,000 $789,600

Required:

Prepare Peat’s consolidated financial statements for April 30,2015. Ignore income taxes.

Question 4

On June 30, 2014, Pewter Ltd. gave 28,000 shares to Sterling Co.in exchange for 70% of Sterling’s outstanding shares. At the timeof the exchange, Pewter’s shares had a fair value of $22.50 pershare. The post-acquisition statements of financial position andSterling’s fair values are shown below.

Statement of Financial Position

As of June 30, 2014

Sterling Co.______

Pewter Ltd. Book value Fair Value

Assets:

Current assets:

Cash $ 750,000 $ 37,500 $ 37,500

Accountsreceivable 1,500,000 112,500 112,500

Inventory 150,000 37,500 37,500

2,400,000 187,500

Non-current assets:

Land 750,000 225,000 300,000

Equipment 2,250,000 375,000 412,500

Accumulatedamortization (900,000) (112,500)

Investment inSterling 630,000 __ -___

2,730,000 487,500

Totalassets $5,130,000 $ 675,000

Liabilities and shareholders’ equity:

Current liabilities:

Accountspayable $ 750,000 $ 75,000 75,000

Loanpayable 300,000 _____

1,050,000 75,000

Shareholders’ equity:

Commonshares 2,580,000 150,000

Retainedearnings 1,500,000 450,000

4,080,000 600,000

Total liabilities and shareholders’equity $5,130,000 $ 675,000

Required:

a) Calculate Pewter’s consolidated goodwill.

b) Prepare Pewter’s consolidated statement of financial positionat
June 30, 2014 using the entity theory method of consolidation.

Weekly leaderboard

Home
Homework Help 3,900,000
Accounting 580,000
Start filling in the gaps now
Log in