Q2

Harpoon Ltd acquired all of the issued shares of Spearfish Ltd (cum div) on the 1st July 2022. Spearfish Ltd’s financial position at the date of acquisition was as follows:

Spearfish Ltd had an internally generated patent that Harpoon Ltd valued at $26,000, which had an expected useful life of 5 years with any income from it being spread evenly over its life. The plant and machinery had a remaining life of 10 years with a straight line depreciation rate being applied. All inventory was sold by 30th June 2023. In June 2023 the CFO conducted an impairment test on goodwill and the 1st July 2022 balance was written off. The dividend payable was paid in August 2022.

Harpoon Ltd provided the following purchase consideration for the exchange of shares in Spearfish Ltd. 130,000 ordinary shares in Harpoon Ltd with each share being attributed a fair value of $2.10. There was a cash payment of $104,000 and a software licence with a fair value of $143,000. Legal and financial advice provided to Harpoon Ltd incurred fees of $13,000 and the costs of share issue were $10,400. The Spearfish Ltd retained earnings balance at acquisition funded a bonus dividend of $104,000 of one share for every three shares paid on 14th February 2025.

The tax rate is 30%

Required

Prepare the consolidation journal entries for consolidated financial statements prepared by Harpoon Ltd at 30 June 2027.

June 2027.

Acquisition analysis

BCVR entries

Pre-acquisition entries at 1/7/22 and 30/6/27