Pop Ltd and Bubble Ltd are small family-owned companies engaged in sustainably farmed vegetables. The owners of Pop Ltd are doing very well, while the owners of Bubble Ltd want to retire. On 1 July 2024, Pop Ltd took over the operations of Bubble Ltd, which then liquidated. The statement of financial position of Bubble Ltd as at 30 June 2024 was as follows: Cash 2 000 Accounts Receivable 15 000 Land 90 000 Building Accumulated depreciation - Building Equipment Accumulated depreciation - Equipment 125 000 (95 000) 114 000 (36 000) Vehicles 100 000 Accumulated depreciation - Vehicles (32 000) $283 000 Total Assets Accounts payable 23 500 Bank loan 107 500 Share Capital ($2 ordinary shares) Retained earnings Total Liabilities & Equity 120 000 32 000 $283 000 Pop Ltd agreed to acquire all of the assets, except cash and vehicles, of Bubble Ltd and assume all of the liabilities except accounts payable. All the assets of Bubble Ltd are recorded at fair value, except for the following: Fair Value Land 110 000 Building Vehicles 80 000 34 000 In return, Pop Ltd is to give the owners of Bubble Ltd a block of vacant land, two vehicles and sufficient additional cash to enable Bubble Ltd to pay off the accounts payable and the liquidation costs of $2500. On 1 July 2024, the land had a fair value of $120 000 (carrying amount of $50 000) and the vehicles had a fair value of $28 000 (cost of $50 000 and accumulated depreciation of $20 000). Required Prepare the acquisition analysis and the journal entries to record the acquisition of Bubble Ltd in the records of Pop Ltd.
Pop Ltd and Bubble Ltd are small family-owned companies engaged in sustainably farmed vegetables. The owners of Pop Ltd are doing very well, while the owners of Bubble Ltd want to retire. On 1 July 2024, Pop Ltd took over the operations of Bubble Ltd, which then liquidated. The statement of financial position of Bubble Ltd as at 30 June 2024 was as follows: Cash 2 000 Accounts Receivable 15 000 Land 90 000 Building Accumulated depreciation - Building Equipment Accumulated depreciation - Equipment 125 000 (95 000) 114 000 (36 000) Vehicles 100 000 Accumulated depreciation - Vehicles (32 000) $283 000 Total Assets Accounts payable 23 500 Bank loan 107 500 Share Capital ($2 ordinary shares) Retained earnings Total Liabilities & Equity 120 000 32 000 $283 000 Pop Ltd agreed to acquire all of the assets, except cash and vehicles, of Bubble Ltd and assume all of the liabilities except accounts payable. All the assets of Bubble Ltd are recorded at fair value, except for the following: Fair Value Land 110 000 Building Vehicles 80 000 34 000 In return, Pop Ltd is to give the owners of Bubble Ltd a block of vacant land, two vehicles and sufficient additional cash to enable Bubble Ltd to pay off the accounts payable and the liquidation costs of $2500. On 1 July 2024, the land had a fair value of $120 000 (carrying amount of $50 000) and the vehicles had a fair value of $28 000 (cost of $50 000 and accumulated depreciation of $20 000). Required Prepare the acquisition analysis and the journal entries to record the acquisition of Bubble Ltd in the records of Pop Ltd.
Chapter28: Income Taxati On Of Trusts And Estates
Section: Chapter Questions
Problem 8DQ
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Transcribed Image Text:Pop Ltd and Bubble Ltd are small family-owned companies engaged in sustainably farmed
vegetables. The owners of Pop Ltd are doing very well, while the owners of Bubble Ltd want
to retire. On 1 July 2024, Pop Ltd took over the operations of Bubble Ltd, which then
liquidated.
The statement of financial position of Bubble Ltd as at 30 June 2024 was as follows:
2$
Cash
2 000
Accounts Receivable
15 000
Land
90 000
Building
Accumulated depreciation - Building
Equipment
Accumulated depreciation – Equipment
125 000
(95 000)
114 000
(36 000)
Vehicles
100 000
(32 000)
$283 000
Accumulated depreciation - Vehicles
Total Assets
Accounts payable
23 500
Bank loan
107 500
Share Capital ($2 ordinary shares)
Retained earnings
Total Liabilities & Equity
120 000
32 000
$283 000
Pop Ltd agreed to acquire all of the assets, except cash and vehicles, of Bubble Ltd and assume
all of the liabilities except accounts payable.
All the assets of Bubble Ltd are recorded at fair value, except for the following:
Fair Value
Land
110 000
Building
80 000
Vehicles
34 000
In return, Pop Ltd is to give the owners of Bubble Ltd a block of vacant land, two vehicles and
sufficient additional cash to enable Bubble Ltd to pay off the accounts payable and the
liquidation costs of $2500. On 1 July 2024, the land had a fair value of $120 000 (carrying
amount of $50 000) and the vehicles had a fair value of $28 000 (cost of $50 000 and
accumulated depreciation of $20 000).
Required
Prepare the acquisition analysis and the journal entries to record the acquisition of Bubble
Ltd in the records of Pop Ltd.
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