Financial information for Kaija Ltd and its 100% owned subsidiary, Helena Ltd, for the period ended 31 December 2017 is provided below.
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Halle Ltd
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Helene Ltd
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Sales revenue
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$25 000
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$23 goo
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Dividend revenue
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1 000
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0
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Gain on sale of property, plant and equipment
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1 000
|
2 000
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Other income
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1 000
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2 000
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Total Income
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28 000
|
22 600
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Cost of sales
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21 000
|
18 000
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Other captain
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3 000
|
1 000
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Total expenses
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24 000
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19 000
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Profit before income tax
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4 000
|
8 600
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Income tax expense
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1 350
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1 950
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Profit for the period
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2 650
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6 650
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Retained earnings (1/1/17)
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6 000
|
3 000
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8 650
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9 650
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Interim dividend paid
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2 500
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1 000
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Retained earnings (31/12/17)
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6150
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8650
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Kaija Ltd acquired its shares in Helena Ltd at 1 January 2017, buying the 10 00o shares in Helena Ltd for $20 00o. At that date, Helena Ltd recorded share capital of $io too. The shares were bought on a cum div. basis. Helena Ltd had declared prior to the acquisition a dividend of 53000 that was paid in March 2017.
At 1 January 2017, all identifiable assets and liabilities of Helena Ltd were recorded at fair value except for inventories, for which the carrying amount was $400 less than fair value. Some of the inventories has been a little slow to sell, and 10% of it is still on hand at 31 December 2017. Inventories on hand in Helena Ltd at 31 December 2017 also include some items acquired from Kaija Ltd during the period ended 31 December 2017. These were sold by Kaija Ltd for $5000, at a profit before tax of Si 000. Half of the goodwill was written off as the result of an impairment test on 31 December 2017.
During March 2017, Kaija Ltd provided some management services to Helena Ltd at a fee of Soo paid by 31 December 2017.
On t July 2017, Helena Ltd sold machinery to Kaija Ltd at a gain of $2000. This machinery had a carrying amount to Helena Ltd of S20 000, and was considered by Kaija Ltd to have a 5-year life.
By 31 December 2017, the financial assets acquired by Kaija Ltd and Helena Ltd from external entities increased by St000 and $650 respectively with gains and losses being recognized in other comprehensive income.
The tax rate is 30%. Requited
1. Prepare the acquisition analysis at I January 2017.
2. Prepare the business combination valuation entries and pre-acquisition entries at I January 2017.
3. Prepare the business combination valuation entries and pre-acquisition entries at 31 December 2017.
4. Prepare the consolidation worksheet journal entries to eliminate the effects of intragroup transactions at 31 December 2017.