Aye Ltd acquired 90% interest in Bee Ltd on 1 January 20x1, for which the purchase consideration was structured as follows: -Cash of $800,000

Aye Ltd acquired 90% interest in Bee Ltd on 1 January 20x1, for which the purchase consideration was structured as follows:

-Cash of $800,000.
-A parcel of freehold land with carrying amount of $300,000 in the books of Aye Ltd but had a fair value of $400,000 as at 1 January 20x1.
-A contingent payment of $100,000 payable in two years from the acquisition-date if Bee Ltd meets specific profit targets. On 1 January 20x1, based on the probability of the profit target being met as at that date, the probability-weighted discounted fair value of the contingent payment was $89,120.
-A deferred payment of $800,000 payable at the end of five years. The present value of this deferred consideration as at 1 January 20x1 was $626,821.On 1 January 20x1, the total equity of Bee Ltd was represented by 1,000,000 ordinary shares at $1,000,000 and retained earnings of $600,880 and the fair values of all its assets and liabilities were the same as their carrying amounts, except for a machine which was estimated to have a fair value of $50,000 in excess of its carrying amount.
The accounting policy of Aye Ltd for its consolidated financial statements is to state non-controlling interest at acquisition-date at its fair value. In conjunction with the acquisition of Bee Ltd above, Aye Ltd had undertaken a valuation exercise and established that the fair value of the non-controlling interest at acquisition-date was $260,000.
Ignore deferred tax effects.


(a) Determine the following amounts as at the acquisition-date:
(i) Purchase consideration incurred by Aye Ltd for the acquisition of Bee Ltd.
(ii) Non-controlling interests.
(iii) Goodwill on consolidation.


(b) Prepare the following accounting entries for the acquisition of Bee Ltd:
(i) Journal entries in the books of Aye Ltd.
(ii) Consolidation journal entries for the preparation of consolidated financial statements of Aye Ltd as at acquisition date


(c) Identify the different forms of purchase consideration which may be used by an acquirer and describe potential issues in relation to the valuation of those forms of consideration.b