Question 1Explain the purpose of the pre-acquisition entries in thepreparation of consolidated financial statements.Question 2When there is a dividend payable by the subsidiary atacquisition date, under what conditions should the existenceof this dividend be taken into consideration in preparing thepre-acquisition entries?Question 3: Prepare acquisition analysis andConsolidation worksheet entriesSyd Ltd acquired all the issued shares (Cum-div.) of Mel Ltdon 1 July 2020. At this date the financial position of Matt Ltdwas as follows:Carrying Fair ValueAmount$300 000(60 000)25 200Plant270 000Accumulated DepreciationAccount Receivables25 200Cash15 00015 00015 600295 800Inventories19 600Share Capital220 000General Reserve23 400Retained Earnings24 200Provisions of Employee benefitsDividend Payable19 20019 2009 000295 8009 000Additional information:The assets of Mel Ltd did not include a patent that was valuedby Syd Ltd at $12 000. Its useful life was considered to be 6years, with benefits being received equally over that period.The plant was considered to have a further 10-year life and isdepreciated on a straight-line basis.All the pre-acquisition inventories were not sold by 30 June2021.An interim dividend of $10,000 paid by Mel Ltd in September2020.Syd Ltd declared a final dividend of $20 000 in June 2020.In exchange for the shares in Mel Ltd, Syd Ltd gave thefollowing consideration:• 80 000 shares in Robert Ltd, each share having a fair valueof $2.50 per share• cash of $45 000• Artwork having a fair value of $35 000.Syd Ltd incurred legal and accounting costs of $4 500 andshare issue costs of $3 000.The tax rate is 30%.Required:a. Prepare Acquisition Analysis at 1 July 2020.b. Prepare the consolidation worksheet entries forconsolidated financial statements prepared by Syd Ltd at30 June 2021.c. Prepare the acquisition analysis at1 July 2020 assumingSyd Ltd acquired the issued share of Mel Ltd on Ex-divbasis.

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Description: Question 1Explain the purpose of the pre-acquisition entries in thepreparation of consolidated financial statements.Question 2When there is a dividend payable by the subsidiary atacquisition date, under what conditions should the existenceof this di

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Question i Explain the purpose of the pre-acquisition entries in the preparation of consolidated financial statements.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

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ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

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Problem 21MCQ

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When there is a dividend payable by the subsidiary at acquisition date, under what conditions should the existence of this dividend be taken into consideration in preparing the pre-acquisition entries?
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