Please help to provide solution with working?.
ABC Ltd made a takeover bid for all the issued voting shares of XYZ Ltd offering three ABC Ltd shares for every two XYZ Ltd shares. The offer from ABC Ltd was accepted by 90% of the shareholders of XYZ Ltd. The date control was obtained by ABC Ltd was deemed to be 1 January 20X7. The following information is available.
(a) Shareholders’ equity of XYZ Ltd at balance date on 31 December 20X6:
Share capital (200,000) shares 200
General reserve 300
Retained earnings 150
(b) Market value of each entity’s shares at 1 January 20X7
ABC Ltd $3.20
XYZ Ltd $4.00
(c) In XYZ Ltd’s accounting records, land was stated at $200,000 below its cost to the group. This is to be accounted for as a consolidation adjustment. Statements of comprehensive income and statements of financial position of ABC Ltd and XYZ Ltd for the year ended 31 December 20X8 are as follows:
Statements of Comprehensive Income
ABC Ltd XYZ Ltd
Sales 5000 2000
Cost of sales 2570 1025
Gross profit 2430 975
Dividend revenue 252 –
Expenses 2057 300
Operating profit before tax 625 675
Income tax expense 280 260
Operating profit after tax 345 415
Retained earnings at 1.1.X8 294 200
Profit for the year 345 415
Interim dividend paid (100) (150)
Final dividend declared (160) (200)
Retained earnings at 31.12.X8 379 265
Statements of Financial Position
ABC Ltd XYZ Ltd
Other current assets 385 395
Total current assets 385 395
Property, plant and equipment 550 750
Investments 864 –
Total non-current assets 1414 750
Total assets 1799 1145
Trade and other payables 60 180
Provision for final dividend 160 200
Total current liabilities 220 380
Total liabilities 220 380
Net assets 1579 765
Share capital 1200 200
General reserve – 300
Retained earnings 379 265
Total equity 1579 765
Cost Sales Price
From ABC and XYZ $300 000 $500 000
From XYZ to ABC $200 000 $350 000
5. In relation to the inventory sales in (d) above, inventory held by ABC Ltd and purchased from XYZ Ltd is as follows:
Cost Sales Price
As at 1 Jan 2008 $50 000 $120 000
As at 31 Dec 2008 $75 000 $150 000
6. The rate of company income tax is 30%.
7. Assume the directors of ABC Ltd have adopted the full goodwill method.
Prepare the consolidated financial statements at 31 December 20X8.
Show all consolidation journal entries and a worksheet and all workings for the calculation of NCI.
The consolidated financial statements should be presented in the same manner your textbook presents them.
Explain the partial and the full goodwill methods. In your discussion list the advantages and disadvantages of using each method.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more