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VIDEO LECTURE NOTES—

SIMULATION: CONSOLIDATIONS (IFRS)

SIMULATION
Solutions to the simulation can be found at the end of the Video Lecture Notes.

FB Corp. prepares its financial statements in accordance with IFRS. FB acquired 100% of the
outstanding common stock of Skarlet, Inc. for $5,500,000. The purchase price included $300,000
to reimburse the former shareholders of Skarlet for legal fees incurred to complete the acquisi-
tion. The company also agreed to pay the seller an additional $1,500,000 if Skarlet generated
$5,000,000 in net earnings during the first two years after the acquisition. At the acquisition date,
the fair value of the contingent consideration was $750,000.
For each of the acquisition items, enter the amount that should be reflected in the line item of
FB’s consolidated financial statements as of the acquisition date. Enter debit balances as positive
values and credit balances as negative values. If an item is not included in any line item, enter
zeros in each cell of the associated row.

©Surgent Professional Education 1


Simulation: Consolidations (IFRS)

Carrying Other Total assets,


1 amount at the Fair value at comprehensive excluding
Acquisition item acquisition date acquisition date Profit or loss income goodwill Total liabilities
Property, plant
2
and equipment $4,000,000 $4,200,000
In-process
3
research costs 0 1,320,000
4 Legal fees 300,000 300,000
Noncompete
5 agreement with
former owners 0 550,000
6 Bonds payable 475,000 450,000
Estimated post-
7 acquisition
restructuring costs 0 265,000
Contingent
8
consideration 0 750,000
9 Total

In the shaded cell below, enter the amount of goodwill recorded as of the acquisition date. Enter the amount as a positive value.

A B
1 Goodwill

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Simulation: Consolidations (IFRS)

SIMULATION SOLUTIONS

Carrying Other Total assets,


1 amount at the Fair value at comprehensive excluding
Acquisition item acquisition date acquisition date Profit or loss income goodwill Total liabilities
Property, plant
2
and equipment $4,000,000 $4,200,000 0 0 $4,200,000 0
In-process
3
research costs 0 1,320,000 0 0 1,320,000 0
4 Legal fees 300,000 300,000 300,000 0 0 0
Noncompete
5 agreement with
former owners 0 550,000 0 0 550,000 0
6 Bonds payable 475,000 450,000 0 0 0 (450,000)
Estimated post-
7 acquisition
restructuring costs 0 265,000 0 0 0 0
Contingent
8
consideration 0 750,000 0 0 0 (750,000)
9 Total $300,000 $0 $6,070,000 ($1,200,000)

A B
1 Goodwill $330,000