Elimination of the investment in Bridge Ltd and the recognition of goodwill on consolidationBridge Ltd

Share Capital at acquistion date - 1 July 2011 $300,000 Retained earnings at acquisition date—1 July 125,000 Revaluation Surplus for Plant (65000*0.70) 45,500

470,500 Investment in Bridge LtdGoodwill on Acquisition

Description D

1.a Share capital 240,000

Retained earnings 100,000

Revaluation surplus 36,400Goodwill 63600 Investment in Bridge Ltd.(Eliminations of investments in bridge ltd.)

1.b Plant 30,000

Revaluation surplus

DTA(Plant revaluation on acquisition of Bridge ltd)

1.c Patent 35000

Revaluation surplus

DTL(Patent recognition on acquisition of Bridge Ltd)

1.d Retained earnings 6000

Depreciation expenses 4800

Accumulated Dep.

(depreciation on revalued plant)

1.e DTL 3240

Retained earnings

Income tax expense(tax effect on the depreciation)

1.f Sales 70200 Cost of good sold(elimination of intra group sales)

1.g Cost of good sold 9600 Inventory(Eliminations of unrealized profit in closing inventory)

1.h DTA 2880 Income tax expenses(Tax implications of intra-group unrealized profit elimination)

2 Impairment loss goodwi 6360

Retained earnings 3180 Accumulated impairment goodwill( Goodwill written off)

3.a Plant 41,984 Accumulated depreciation

Loss on sale of plant(Reversal of intra group sale)

3.b Income Tax expense 2,095 DTL(Tax implications of intar group sales)

3.c Depreciation expense 1955 Accumulated depreciation(Dep implications of intar group sales)

3.d DTL 587 Income tax expenses(Tax implications of intar group sales)

Elimination of the investment in Bridge Ltd and the recognition of goodwill on consolidationHarbour Ltd

$240,000 100,000 36,400 376,400 440,000 63,600

C Calculations

300000*80%

125000*80%

45500*80%

440,000

30000*100%

21,000 30000*70%

9,000 30000*30%

35000*100%

24500 35000*70%

10500 35000*30%

30000*20%

10800 (6000+4800)

(30000-6000)*20%

10800*30%

1800 6000*30%

1440 4800*30%

70200

33600*40/1409600

9600*30%2880

63600*10%

63600*5%9540

35,000

6,984 41984-35000

(6984*30%)2,095

{(82000-20%)-20%}-20%

1,955

1955*30%587

{(6984*10%)+(6984-698)*20%}