Country : Australia
Assignment Task:

PART A  

SweetieCake Ltd is a producer of specialized baked goods that it supplies to exclusive restaurants in the Brisbane area. SweetieCake Ltd has the following investments:

Investment in Pastry Products Ltd

SweetieCake Ltd purchased 20% of the shares in Pastry Products Ltd on 1 January 2018 for$600,000 cash. Pastry Products’ issued share capital consisted of 50,000 shares of $1 each at 1 January 2016.

Investment in BlackBerries Ltd:

SweetieCake Ltd purchased 75% of the shares in BlackBerries Ltd on 1 July 2019. At this date shareholders’ equity of BlackBerries Ltd comprised: retained earnings $850,000; and issued capital $220,000 (nominal value of $1 per share). The share price of BlackBerries Ltd on 1 July 2019 was $6.34 per share.

The following issues arose at acquisition:

  1. BlackBerries Ltd have a trademark with a carrying amount of $520,000 and a remaining useful life of 5 years. On 1 July 2019 the fair value of the trademark was provisionally estimated to be $665,000 and disclosed in the consolidated financial statements at 31 December 2019 as a provisional amount. As no active market existed for the trademark, an external appraiser was requested to value the trademark at acquisition. The valuation process required the identification and analysis of comparable trademarks and took longer than originally expected. The report from the appraiser was received on 31 January 2020 and reflected a fair value for the trademark of $650,000.

  2. SweetieCake settled the purchase consideration for BlackBerries Ltd as follows:

    • Plant with a carrying amount of $280,000 and a fair value of $310,000. The plant had originally cost $400,000 and had a tax base of $275,000 on 1 July 2019;

    • Issued 5,000 shares with a nominal value of $1. The share price of SweetieCake Ltd’s shares at 1 July 2019 was $31.25 per share. Share issue expenses of $3,125 were paid;

 

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  • Posted on : June 23rd, 2019
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