Study notes

QUESTION 17.11
PLATYPUS LTD – WOMBAT LTD
75%
Platypus Ltd

Wombat Ltd
Platypus Ltd 75%
NCI
25%

A: PARTIAL GOODWILL METHOD
Acquisition analysis
At 1 July 2005:
Net fair value of identifiable assets and liabilities of Wombat Ltd

Net fair value acquired
Consideration transferred
Goodwill

=

=
=
=
=
=

($20 000 + $2 000 + $10 000) (equity)
+ $10 000 (1 – 30%)(machinery)
+ $4 000 (1 – 30%) (inventory)
- $2 000 (1 – 30%) (receivables)
$40 400
75% x $40 400
$30 300
$40 000
$9 700

1. Business combination valuation entries at 30/6/10
Depreciation expense
Carrying amount of machinery sold
Retained earnings (1/7/09)
Income tax expense
Transfer from business combination valuation reserve
(Depreciation is 20% x $10 000 per annum)

Dr
Dr
Dr
Cr

1 000
1 000
5 600
600

Cr

7 000

2. Pre-acquisition entries at 30/6/10
Pre-acquisition entries at 1/7/05
Retained earnings (1/7/05)
Share capital
Business combination valuation reserve
General reserve
Goodwill
Shares in Wombat Ltd

Dr
Dr
Dr
Dr
Dr
Cr

7 500
15 000
6 300
1 500
9 700
40 000

Pre-acquisition entry at 30/6/10:
Retained earnings (1/7/09) *
Dr
8 550
Share capital
Dr
15 000
Business combination valuation reserve
Dr
5 250
General reserve
Dr
1 500
Goodwill
Dr
9 700
Shares in Wombat Ltd
Cr
* 75%[$10 000 + $2 800 (inventory) – $1 400 (receivables)]

40 000

Transfer from business combination valuation reserve
Business combination valuation reserve
(75% x $7 000)

Dr
Cr

5 250

Dr
Dr
Dr
Dr
Cr

2 500
5 000
2 100
500

Dr
Dr
Cr
Cr

1 100
500

NCI share of profit
NCI
(25%($15 600 – ($1 000 + $1 000 - $600)))

Dr
Cr

3 550

General reserve
Transfer to general reserve
(25% x $1 000)
Gains/Losses: asset revaluation reserve
NCI
(25% x $500)

Dr
Cr

250

Dr
Cr

125

5 250

3. NCI share of equity at 1/7/05
Retained earnings (1/7/09)
Share capital
Business combination