POM acquired 80% of the share of SOM for $26,550 on 1 Jan 2019, the date of acquisition (DOA). At this date, the equity of SOM consisted of share capital of $15,000 and retained earnings of $12,250. At 1 Jan 2019, all the identifiable assets and liabilities of SOM were recorded at fair value except for the following: Carrying amount Fair value $10,000 Plant $7,500 The plant had a remaining useful life of 5 years with depreciation based on the straight-line method. The fair value of the non-controlling interest (NCI) in SOM on DOA was $6,000. Tax rate is 10%. On 1 Jan 2021, POM acquired 30% of the shares of AOM for $7,450. Significance influence on AOM was obtained as a result. At this date, AOM's equity consisted of the share capital of $7,500 and retained earnings of $11,250. AOM made a profit of $5,200 for the year ended 31 Dec 2021. The following intra-group or inter-entity transactions happened in the period from 1 Jan 2021 to 31 Dec 2021 1. On 1 Jan 2021, POM held an inventory of $2,500 purchased from SOM during the year ended 31 Dec 2020. The inventory had been manufactured by SOM at a cost of $1,600. The inventory was sold by POM for $3,000 to a third party during the year 2021. 2. In 2021, SOM sold inventory costing $6,000 to POM for $9,000 and 35% of these inventories were still on hand at 31 Dec 2021. 3. In Jan 2021, POM Ltd sold a plant costing $8,000 to SOM Ltd for $10,000. SOM Ltd applies a straight-line 20% per annum on cost for its depreciation. 4. SOM made profits of $9,000 in 2019 and 2020. And it further made a $3,750 profit for the year ended 31 Dec 2021.
POM acquired 80% of the share of SOM for $26,550 on 1 Jan 2019, the date of acquisition (DOA). At this date, the equity of SOM consisted of share capital of $15,000 and retained earnings of $12,250. At 1 Jan 2019, all the identifiable assets and liabilities of SOM were recorded at fair value except for the following: Carrying amount Fair value $10,000 Plant $7,500 The plant had a remaining useful life of 5 years with depreciation based on the straight-line method. The fair value of the non-controlling interest (NCI) in SOM on DOA was $6,000. Tax rate is 10%. On 1 Jan 2021, POM acquired 30% of the shares of AOM for $7,450. Significance influence on AOM was obtained as a result. At this date, AOM's equity consisted of the share capital of $7,500 and retained earnings of $11,250. AOM made a profit of $5,200 for the year ended 31 Dec 2021. The following intra-group or inter-entity transactions happened in the period from 1 Jan 2021 to 31 Dec 2021 1. On 1 Jan 2021, POM held an inventory of $2,500 purchased from SOM during the year ended 31 Dec 2020. The inventory had been manufactured by SOM at a cost of $1,600. The inventory was sold by POM for $3,000 to a third party during the year 2021. 2. In 2021, SOM sold inventory costing $6,000 to POM for $9,000 and 35% of these inventories were still on hand at 31 Dec 2021. 3. In Jan 2021, POM Ltd sold a plant costing $8,000 to SOM Ltd for $10,000. SOM Ltd applies a straight-line 20% per annum on cost for its depreciation. 4. SOM made profits of $9,000 in 2019 and 2020. And it further made a $3,750 profit for the year ended 31 Dec 2021.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:POM acquired 80% of the share of SOM for $26,550 on 1 Jan 2019, the date of acquisition (DOA). At this date, the equity of SOM consisted of share capital of $15,000 and retained
earnings of $12,250. At 1 Jan 2019, all the identifiable assets and liabilities of SOM were recorded at fair value except for the following:
Carrying amount Fair value
Plant
$7,500
$10,000
The plant had a remaining useful life of 5 years with depreciation based on the straight-line method. The fair value of the non-controlling interest (NCI) in SOM on DOA was
$6,000. Tax rate is 10%.
On 1 Jan 2021, POM acquired 30% of the shares of AOM for $7,450. Significance influence on AOM was obtained as a result. At this date, AOM's equity consisted of the share
capital of $7,500 and retained earnings of $11,250. AOM made a profit of $5,200 for the year ended 31 Dec 2021.
The following intra-group or inter-entity transactions happened in the period from 1 Jan 2021 to 31 Dec 2021
1. On 1 Jan 2021, POM held an inventory of $2,500 purchased from SOM during the year ended 31 Dec 2020. The inventory had been manufactured by SOM at a cost of $1,600.
The inventory was sold by POM for $3,000 to a third party during the year 2021.
2. In 2021, SOM sold inventory costing $6,000 to POM for $9,000 and 35% of these inventories were still on hand at 31 Dec 2021.
3. In Jan 2021, POM Ltd sold a plant costing $8,000 to SOM Ltd for $10,000. SOM Ltd applies a straight-line 20% per annum on cost for its depreciation.
4. SOM made profits of $9,000 in 2019 and 2020. And it further made a $3,750 profit for the year ended 31 Dec 2021.
REQUIRED:
1. Calculate the goodwill on the acquisition of SOM.
2. Prepare all the journal entries for the consolidation of POM Group. No consolidated worksheet is required.
3. Show the balance of investment in associate stated on the statement of financial position as at 31 December 2021.
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