Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1 900 000 on 30 June 2014.The financial statements of both entities on 30 June 2105 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2014 was $1 332 000.The equity of Freud at that time was made up of share capital of $1 172 000 and retained earnings of $160 000.Goodwill had been determined to have been impaired by $56 800 during the period.During the period ended 30 June 2015 there were no intragroup transactions.Which of the following consolidated financial statements is correct?

Question

Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1 900 000 on 30 June 2014.The financial statements of both entities on 30 June 2105 are:  The fair value of the net tangible assets of Freud Ltd on 30 June 2014 was $1 332 000.The equity of Freud at that time was made up of share capital of $1 172 000 and retained earnings of $160 000.Goodwill had been determined to have been impaired by $56 800 during the period.During the period ended 30 June 2015 there were no intragroup transactions.Which of the following consolidated financial statements is correct?

Quizplus · Accepted Answer

Choice A is incorrect because it does not reflect the impairment of goodwill.
Choice B is incorrect because it includes a net income of $258,400 for Freud Ltd which is not applicable as the acquisition was made in June 2014 and there were no intragroup transactions during the period. 
Choice C is correct because it reflects the impairment of goodwill and shows the accurate total equity of the group as $3,029,200.
Choice D is incorrect because it does not include the impairment of goodwill.

Sigmund Ltd Acquires All the Issued Capital of Freud Ltd