60.1K

Verified Solution

Link Copied!

On 1 July 2012 Sarah Ltd acquires all the shares in Jane Ltd for $594,000 cash

The financial statements of Jane Ltd as at 1 July 2012 shows the following:

Retained earnings 171,000

Share capital 214,000

The tax rate is 30%

At the date of acquisition all the net assets of Jane Ltd are at fair value except for the following:

	Carrying amount	Fair value
Equipment (cost $241,000)	$145,000	$215,000

The equipment has a further 19 years of useful life.

All consolidation entries on 30 June 2020 are shown below:

Dr. Retained earnings	$171,000
Dr. Share capital	$214,000
Dr. BCVR
Dr. Goodwill
Cr. Investment in Jane Ltd		$594,000

Dr. Accumulated depreciation	241,000 145,000
Dr.(or Cr.) Equipment
Cr. BCVR		( 215,000 145,000 ) x 70%
Cr. DTL		( 215,000 145,000 ) x 30%

Dr. Retained earnings	xxx
Dr. Depreciation expense	( 215,000 145,000 ) / 19
Cr. Accumulated depreciation

Dr. DTL
Cr. Income tax expense		( 215,000 145,000 ) x 30% / 19
Cr. Retained earnings

Complete the consolidation journals above and enter the amount of xxx (retained earnings) in the answer block below:

Answer:

Answer & Explanation Solved by verified expert

See Answer