Acquisition analysis:

At 1 July 2016:

Net fair value of identifiable assets and liabilities acquired = $ 100 000 + $ 50 000 + $ 70 000 (Equity)

= $ 220 000

Consideration transferred = $ 240 000 - $ 20 000 (Dividend receivable)

= $ 220 000

Goodwill =$0

A: Worksheet entries at 1 July 2016

Retained earnings (01/07/16) Dr 70 000

Share capital Dr 100 000

General reserve Dr 50 000

Shares in Laurie Ltd Cr 220 000

Dividend payable Dr 20 000

Dividend receivable Cr 20 000

B: Worksheet entries at 30 June 2017 (repeat the same entry for the purpose of consolidation inorder to
reflect on the balance sheet)- refer to slide 24 point 2

Retained earnings (01/07/16) Dr 70 000

Share capital Dr 100 000

General reserve Dr 50 000

Shares in Laurie Ltd Cr 220 000

C: Differences if shares issued on an ex div basis

Acquisition analysis:

At 1 July 2016:

Net fair value of identifiable assets and liabilities acquired = $ 100 000 + $ 50 000 + $ 70 000 (Equity)

= $ 220 000

Consideration transferred = $ 240 000

Goodwill = $ 20 000 (COA>FVINA) it’s a goodwill

The worksheet entries at 1 July 2016 and 30 June 2017 are the same:

1. Business combination valuation reserve entries (only prepared when goodwill is accounted)
Goodwill Dr 20 000
Business combination valuation reserve Cr 20 000

2. Pre-acquisition entries
Retained earnings (01/07/16) Dr 70 000
Share capital Dr 100 000
General reserve Dr 50 000
Business combination valuation reserve Dr 20 000
Investment in Laurie Ltd Cr 240 000

Note one year later you will repeat the above entries but instead BCVR you will write goodwill