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Presentation/PPT
27/08/2022
On 1 July 2012, A Ltd acquired 80% of the issued shares in B Ltd for a cash payment of $12,000,000. At the date of acquisition, the shareholders’ equity of Blue Sky Ltd comprised the following:
Share Capital $6,000,000
General Reserve $3,000,000
Retained profit $3,000,000
$12,000,000
At the date of acquisition a depreciate non-current asset of B Ltd were valued at $800,000 below their fair values. The directors of A Ltd decided not to advise the directors of B Ltd to revalue the relevant assets. Furthermore, no adjustments have been made with respect to these non-current assets in the accounts of B Ltd since the date of acquisition. This depreciate asset had a useful life of ten (10) years at the date of acquisition. Goodwill on acquisition was impaired by $550,000 in the financial year ended 30 June 2013 and $600,000 in the financial year ended 30 June 2017. The information extracted from statement of comprehensive income, statement of financial position and statement of changes in equity of A Ltd and B Ltd for the year ended 30 June 2017 is shown as below:
A ($,000) B Ltd ($,000)
Sales 125,000 75,000
Cost of goods sold (80,000) (69,000)
Gross profits 45,000 6,000
Other income 5,000 3,000
Operating expenses (4,000) (2,600)
Operating profit before income tax expense 46,000 6,400
Income tax expense (13,800) (1,920)
Operating profit after income tax expense 32,200 4,480
Retained profit (1/7/16) 12,000 6,200
Interim dividend paid (1/1/17) (8,200) (800)
Proposed Final dividend (4,800) (1,200)
Retained profit (30/6/17) 31,200 8,680
A Ltd $,000 B Ltd$,000
Current assets 18,274 4,678
Non-current assets 55,443 16,449
Investments 16,353 5,113
90,070 26,240
Share capital 35,000 6,000
General reserve 7,500 3,200
Revaluation Surplus 870 560
Retained profit 31,200 8,680
Liabilities 15,500 7,800
90,070 26,240
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