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ACCT6005 - Company Accounting Cash Value Case Study Assignment - Torrens University Australia
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Assignment Task
Case study
On 1 July 2020, Big Ltd acquired all the shares of Ben Ltd on an ex-div. basis. Big Ltd paid $700,000 cash and issued 20,000 shares which had a fair value of $30.00 on the acquisition date. On this date, Ben Ltd included the following balances:
| Share capital | $200,000 |
| General reserve | 5,000 |
| Retained earnings | 45,000 |
| Dividend Payable –ex div basis | 10,000 |
| Goodwill | 3,000 |
At the acquisition date, all the identifiable assets and liabilities of Ben Ltd were recorded at amounts equal to fair value except for:
| Carrying amount($) | Fair value($) | Useful life at acquisition date | |
| Land | 1,200,000 | 2,000,000 | Not applicable |
| Plant and equipment (cost $900,000) | 800,000 | 950,000 | 5 years |
| Inventories | 18,000 | 28,000 | 100% sold externally during the year ended 30/6/2021 |
Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed. Dividends were paid and declared by Ben Ltd during the current financial year.
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