Preston Ltd acquired 100% of the capital of Sutherland Ltd on 1 July 2021 for $100,000. On the same date, the balance of shareholder’s equity of Sutherland Ltd comprised:
Share capital $40,000
General reserve $2,000
Retained earnings $20,000
$62,000
At the acquisition date, all the identifiable assets and liabilities of Sutherland Ltd were recorded at fair value except for plant and land.
• The plant had a carrying amount of $180,000 (original cost: $250,000) and fair value of $200,000. The remaining useful life of the plant at the date of acquisition was 5 years.
• The land had a carrying amount of $45,000 and a fair value of $50,000. The land was sold during the year ended 30 June 2023.
Impairment testing was conducted on 30 June 2024 and found that goodwill has been impaired by $5,000. Assume a tax rate of 30%
Required: Prepare an acquisition analysis at the acquisition date, and the consolidation journal entries required at:
(a) Acquisition date;
(b) 30 June 2022;
(c) 30 June 2023;
(d) 30 June 2024.