Question 6 Week 12 (11 marks)
On 1 July 2014 Padma Ltd acquires 25 per cent of the issued capital of Jamuna Ltd for a cash consideration of $360 000. At the date of acquisition, the shareholders’ equity of Jamuna Ltd is:
Share capital |
$450 000 |
Retained earnings |
$300 000 |
Total shareholders’ equity |
750 000 |
Additional information
- On the date of acquisition, buildings have a carrying amount in the accounts of Jamuna Ltd of $240000 and a market value of $300 000. The buildings have an estimated useful life of 10 years after 1 July 2014.
- For the year ending 30 June 2015 Jamuna Ltd records an after-tax profit of $90 000, from which it pays a dividend of $30 000.
- For the year ending 30 June 2016 Jamuna Ltd records an after-tax profit of $300 000, from which it pays a dividend of $150 000.
- Assume a tax rate of 30% is assumed
Required
Apply equity method of accounting to:
- Calculate the amount of goodwill at the date of acquisition (3 marks)
- Prepare the journal entries for the year ending 30 June 2015 (3 marks)
- Prepare the journal entries for the year ending 30 June 2016 (5 marks)
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