Advanced Financial Accounting

ASSIGNMENT On 1 July 2009, Roma Ltd acquired all the shares of Napoli Ltd. On this date, the equity of Napoli Ltd comprised the following balances: Share Capital General Reserve Plant Maintenance Reserve Retained Earnings $180 000 20 000 30 000 72 000

At acquisition date, all the identifiable assets and liabilities of Napoli Ltd were recorded at amounts equal to fair value except for: Carrying Fair Amount Value Land $50 000 $75 000 Buildings (cost $75 000) 55 000 57 000 Inventory 45 000 60 000 Plant (cost $260 000) 182 000 190 000 Delivery Truck (cost $90 000) 36 000 38 000 Any adjustments for differences between carrying amounts at acquisition date and fair values are made on consolidation. Any valuation reserves created are transferred on consolidation to retained earnings when assets are sold or fully consumed or lost. Napoli Ltd registered a patent on 26 June 2009 but did not recognize it as an asset. Roma Ltd believed the fair value of the patent was $45 000. The patent is legally enforceable for a period of 15 years. On 1 January 2013, Napoli Ltd sold the patent for $30 000. At 1 July 2009, Napoli Ltd was involved in a lawsuit brought against it by a customer for damages suffered as a result of poor quality goods supplied. Lawyers for Roma Ltd advised that the court is likely to find in favour of the customer and likely damages may amount to $30 000. After a prolonged court case, damages of $34 000 were paid in full settlement on 3 May 2013. The plant had a further five year life at acquisition date and was expected to be used evenly over that time. Buildings have a further 10 years of useful life. The delivery truck which was expected to have a further four year useful life at acquisition date was sold on 1 April 2012 for 28 000. During the year ended 30 June 2010 all inventory, on hand, at acquisition date, was sold. As a result of the annual impairment test at 30 June 2013, Roma Ltd determined that the goodwill of Napoli Ltd had been impaired by $5 000....