CASE STUDY
Financial Information for Lotus Limited and its 100% owned subsidiary, Troy Limited, for the period ended 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online is shown in the table below:
Lotus Limited
Troy Limited
$
$
Sales Revenue
50000
47200
Dividend Revenue
2000
0
Gain On Sale of Property, Plant and Equipment
2000
4000
Other Income
2000
4000
Total Income
56000
55200
Cost of Sales
42000
36000
Other Expenses
6000
2000
Total Expenses
48000
38000
Profit Before Income Tax
8000
17200
Income Tax Expense
2700
3900
Profit for the Period
5300
13300
Retained earnings ( 1 January 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online)
12000
6000
17300
19300
Interim Dividend Paid
5000
2000
Retained earnings (31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online)
12300
17300
ADDITIONAL INFORMATION:
(a) Lotus Limited acquired the shares in Troy Limited at 1 January 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, buying the 10000 shares in Troy Limited for $40000. At that date, Troy Limited recorded share capital of $20000. The shares were bought on a cum div basis. Troy Limited had declared prior to the acquisition a dividend of $6000 that was paid in March 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
(b) At 1 January 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, all identifiable assets and liabilities of Troy Limited were recorded at fair value, except for inventories, for which the carrying amount was $800 less than fair value. A number of inventories have been difficult to sell, and 10% of it is still in hand at 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
(c) Inventories on hand in Troy Limited at 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online also include some items acquired from Lotus Limited during the period ended 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. These were sold by Lotus Limited for $10000, at a profit before tax of $2000.
(d) Half of the goodwill was written off as the result of an impairment test on 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
(e) During March 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, Lotus Limited provided management services to Troy Limited at a fee of $1000 paid by 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
(f) On 1 July 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, Troy Limited sold machinery to Lotus Limited at a gain of $4000. This machinery had a carrying amount to Troy Limited of $40000. Lotus considered that this machinery had a 5 year life.
(g) By 31 December 2108, the financial assets acquired by Lotus Limited and Troy Limited from external entities increased $2000 and $1300 respectively, with gains and losses being recognised in other comprehensive income.
(h) The TAX RATE is 30%
REQUIRED
1. Prepare the acquisition analysis as at 1 January 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
2. Prepare the business combination valuation entries and pre-acquisition entries as at 1 January 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
3. Prepare the business combination valuation entries and pre-acquisition at 31 December 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.
