The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately
following the acquisition is:
Fair value of assets acquired $2,640,000
Fair value of liabilities acquired $720,000
Total shareholders’ equity of the subsidiary company $800,000
Retained earnings of the subsidiary company $1,120,000
Required:
(a) Pass the necessary journal entry to record the acquisition (2 marks)
(b) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition (2 marks)
(c) Pass the necessary consolidation entry to eliminate the subsidiary by the parent company (2 marks)
(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase
consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50 (1 marks)

See attachment

Explanation:

Check the attachment

For (a),

Common shares = $800,000 × 1.5

= $1,200,000

b. Fair value of assets = $2640000

Less: Fair value of liabilities = ($720000)

Net value of S. Ltd = $1920000

Purchase consideration = $220000

Goodwill on acquisition = $2,200,000 - $1,920,000 = $280,000

d. Fair value of assets acquired = $2,640,000

Less: fair value of liabilities acquired = ($720,000)

Net value of S. Ltd = $1,920,000

Purchase consideration = 1,000,000 + (400,000 × 1.5) = 1,000,000 + 600,000 = 1,600,000

Bargain purchase = $1,920,000 - $1,600,000 = $320,000

See attachment for further explanation

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whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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