On 1 January 20X0, Zed Ltd Acquired 90 % of the Share

question 25

Multiple Choice

On 1 January 20X0, Zed Ltd acquired 90 % of the share capital of Ned Ltd for $900 000 cash.At that date, the equity section of Ned Ltd's balance sheet was as follows:
$\begin{array}{llcc}&\$\\ \text {Share capital } &700000 \\ \text { Retained profits} &50000\\ \text { Asset revaluation reserve } &100000\\\end{array}$

Assume all assets and liabilities were recorded at their fair values, except for a piece of equipment recorded at $50 000 but Zed Ltd considers it to have a fair value of $100 000. This equipment is not revalued by Ned Ltd. What was the difference on acquisition under the partial method?

• A)Nil
• B)$90 000 bargain purchase
• C)$90 000 goodwill
• D)$50 000 goodwill

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Definitions:

Monetary Valuation

The process of determining the financial value of an asset, a company, or an intangible property.

Bailor

A bailor is someone who temporarily hands over control of property to another, known as the bailee, but retains its ownership.

Bailee

A person or entity that temporarily holds property belonging to another under a bailment agreement, often with a duty to care for it.

Personal Property

Any property that is not land or permanently affixed to the land.