Required: a) Prepare an acquisition analysis for Trump Ltd's acquisition of the net assets of Bush Ltd b) Prepare the journal entries to record the acquisition in the books of Trump Ltd c) Prepare the journal entry in the books of Trump Ltd if Trump Ltd had purchased all the issued shares of Bush Ltd by issuing 5,000,000 shares in Trump Ltd at an issue price of $2.50 per share.

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
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ChapterA2: Investments
Section: Chapter Questions
Problem 23E
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Trump Ltd acquired all the assets and liabilities of Bush Ltd
on 30 June 2020.
The purchase consideration was as follows:
$1,000,000 in cash paid on acquisition date
• Two shares in Trump Ltd for every one share in Bush Ltd.
Bush Ltd has 2,000,000 shares on issue at 30 June 2020.
At 30 June 2013 Trump Ltd shares were quoted on the
ASX at $2.50
per share.
• A deferred payment of $500,000 to be paid on 30 June
2014.Trump Ltd's cost of capital is 7% which represents
a one period present value factor of 0.9346
• Should the price of Trump Ltd shares fall below $2.50 in
the six months following the acquisition Trump Ltd is
required to pay a cash contingent consideration. It is
estimated that there is a 60% probability that the share
price will fall to $2.45 in this period.
Other information
Trump Ltd incurred legal and other costs associated with
the acquisition of $10,000
- Trump Ltd incurred share issue costs of $4,000
The assets and liabilities acquired from Bush Ltd are as
follows:
Bush Ltd
Carrying amount Fair Value
760 000
Accounts Receivable
720 000
1 300 000 1 440 000
Inventory
Property Plant and Equipment
Accounts Payable
8 680 000 9 560 000
(680 000) (680 000)
Provision for Employee Benefits
(170 000) (220 000)
In addition Bush Ltd has contingent liabilities of $40,000 at
the acquisition date.
Required:
a) Prepare an acquisition analysis for Trump Ltd's
acquisition of the net assets of Bush Ltd
b) Prepare the journal entries to record the acquisition in
the books of Trump Ltd
c) Prepare the journal entry in the books of Trump Ltd if
Trump Ltd had purchased all the issued shares of Bush
Ltd by issuing 5,000,000 shares in Trump Ltd at an
issue price of $2.50 per share.
Transcribed Image Text:Trump Ltd acquired all the assets and liabilities of Bush Ltd on 30 June 2020. The purchase consideration was as follows: $1,000,000 in cash paid on acquisition date • Two shares in Trump Ltd for every one share in Bush Ltd. Bush Ltd has 2,000,000 shares on issue at 30 June 2020. At 30 June 2013 Trump Ltd shares were quoted on the ASX at $2.50 per share. • A deferred payment of $500,000 to be paid on 30 June 2014.Trump Ltd's cost of capital is 7% which represents a one period present value factor of 0.9346 • Should the price of Trump Ltd shares fall below $2.50 in the six months following the acquisition Trump Ltd is required to pay a cash contingent consideration. It is estimated that there is a 60% probability that the share price will fall to $2.45 in this period. Other information Trump Ltd incurred legal and other costs associated with the acquisition of $10,000 - Trump Ltd incurred share issue costs of $4,000 The assets and liabilities acquired from Bush Ltd are as follows: Bush Ltd Carrying amount Fair Value 760 000 Accounts Receivable 720 000 1 300 000 1 440 000 Inventory Property Plant and Equipment Accounts Payable 8 680 000 9 560 000 (680 000) (680 000) Provision for Employee Benefits (170 000) (220 000) In addition Bush Ltd has contingent liabilities of $40,000 at the acquisition date. Required: a) Prepare an acquisition analysis for Trump Ltd's acquisition of the net assets of Bush Ltd b) Prepare the journal entries to record the acquisition in the books of Trump Ltd c) Prepare the journal entry in the books of Trump Ltd if Trump Ltd had purchased all the issued shares of Bush Ltd by issuing 5,000,000 shares in Trump Ltd at an issue price of $2.50 per share.
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