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The Equity of Steve Ltd Consisted of a Share Capital
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Assignment Task
The equity of Steve Ltd consisted of share capital of $97 000 and retained earnings of $ 66,800 on 1 July 2021. All the identifiable assets and liabilities of Steven Ltd were recorded at amounts equal to fair value except for:
|
|
Carrying amount |
Fair Value |
|
Plant (cost $90,000) |
50 000 |
59 000 |
|
Inventories |
27 600 |
32 000 |
|
Brand |
$76 000 |
$86 000 |
Jones Ltd acquired all the issued shares of Steve Ltd for $ 185,000 on 1 July 2021. The Brand was considered to have an indefinite life. It was estimated that the plant had a further life of 6 years and was depreciated on a straight-line basis. All the inventories were sold by 30 June 2022.
In May 2022, Steve Ltd transferred $ 23,500 from the retained earnings on hand at 1 July 2021 to a general reserve. In June 2022, Steve Ltd conducted an impairment test on the Band and on the goodwill acquired. As a result, the goodwill was considered to be impaired by $600 and brand by $ 6,500.
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