(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital Reserves - 100 000 shares Carrying amount $ 1 000 000 $ 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 980 000 4 220 000 5 200 000 500 000 $4 700 000 Red Ltd In exchange for these net assets, Red Ltd agreed to: issue 10 Red Ltd shares for every Black Ltd share - shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd - the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.

(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital Reserves - 100 000 shares Carrying amount $ 1 000 000 $ 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 980 000 4 220 000 5 200 000 500 000 $4 700 000 Red Ltd In exchange for these net assets, Red Ltd agreed to: issue 10 Red Ltd shares for every Black Ltd share - shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd - the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

On 1 July 2021, James Ltd acquired all the issued shares of Dean Ltd for $350,000. At this date, the financial statements of Dean Ltd showed the following: $ Share capital 270,000 Retained earnings 26,500 General Reserve 8,800 Total equity 305,300 Goodwill 25,000 At acquisition date, all the net identifiable assets and liabilities in Dean Ltd were recorded at amounts equal to their fair value except for: Asset Carrying amount ($) Fair Value ($) Inventories 15,000 18,000 Plant (cost $400,000) 210,000 220,000 The Plant was calculated to have a further life of 5 years, and was depreciated on a straight-line basis. All inventory was sold by 30 June 2020. Assume 30% tax rate Required: Prepare the acquisition analysis at 1 July 2021. Prepare the consolidation entries at acquisition date, 1 July 2021. Include narrations for each entry. Prepare the consolidation worksheet as at 1 July 2021. Prepare a Balance sheet for the reporting Group, James Ltd as at 1 July 2021 in narrative format.
On 30 June 2020 Pink Ltd acquired all assets (except for cash) and assumed all liabilities (except for debentures) of Purple Ltd. At this date, the carrying amounts of assets and liabilities of Purple Ltd were at fair value and consisted of: $15,000 32,000 40,000 Cash Accounts payable $9,000 Accounts receivable Debentures (10%) Share capital ($2 shares) Retained earnings 40,000 Inventory 110,000 Shares in listed companies 90,000 48,000 Motor Vehicle 45,000 Accumulated depreciation (15,000) In exchange for these net assets, Pink Ltd agreed to: issue two (2) Pink Ltd shares for every five (5) shares in Purple Ltd. On 30 June 2020 Pink Ltd shares were valued at $5.50 provide sufficient additional cash in order for Purple Ltd to pay out the debentures (including interest) and liquidation costs of $3,500. Required: Prepare an acquisition analysis for Pink Ltd's acquisition of Purple Ltd. wwww
On 1 July 2020, Sky Ltd acquired 70% of the share capital (ex. div.) of Jim Ltd for $500,000. At that date, the relevant balances in the records of Jim Ltd were: Share capital General reserve Retained earnings Dividend payable S 434,000 35,000 126,000 14,000 At the date of acquisition all assets and liabilities of Jim Ltd were recorded in the accounting records at amounts equal to their fair values with the exception of the following assets: Carrying amount Fair value Land Machine 56,000 30,800 Land was sold on 1 May 2023 for $77,000. $ 67,200 49,000 The cost of the Machine was $58,800 and had a further 5-year life as at the date of acquisition. Jim Ltd had reported a Contingent liability at 1 July 2020 in relation to claims by customers for damaged goods. Sky Ltd placed a fair value of $12,600 on these claims at acquisition date. This claim was settled on 1 April 2023 for $7,000. Additional information: a) On 1 March 2023, Jim Ltd purchased inventory from Sky Ltd for $25,200,…
Sailor Berhad acquired all the shares in Mon Berhad on 31 December 2022 for a cost of RM900,000. The statement of financial poistion of both companies for the year ended 31 December 20221 were as follows: Non-current assets Investment in Mon Berhad at cost Current assets Ordinary share Retained earnings Current liabilities Sailor Berhad RM'000 1,600 900 380 2,880 1,000 1,580 300 2,880 Mon Berhad RM'000 750 300 1,050 500 300 250 1,050 Required: Explain by way of calculation on how to prepare the consolidated statement of financial position for the group as at 31 December 2022.
On 1 July 2021 Salzburg Ltd acquired the shares of Vienna Ltd for $60 000. At acquisition date, the capital of Vienna Ltd consisted of 44 000 ordinary shares each fully paid at $1. There were retained earnings of $4 000. All the identifiable assets and liabilities of Vienna Ltd were recorded at amounts equal to fair value except for: Carrying Fair Amount Value $12 000 Inventory Machinery (cost $100 000) $15.000 80 000 82 000 Land 60 000 70 000 Salzburg Ltd Balance Sheet as at 1 July 2021 Share capital $134 000 Retained earnings $41 400 $15 400 Cash at bank $100 000 Land $60 000 Investment in Wayne Ltd
On 1 July 2021, King Ltd acquired all the share capital of Queen Ltd for $1,800,000, and on that date Queen Ltd.'s equity were as follows: Share capital $1,200,000; Revaluation surplus $500,000 and Retained earnings $200,000. All the assets and liabilities of Queen Ltd. were recorded at fair value on 1 July 2021. During the financial year 2022, the following intragroup transactions occurred between King Ltd and Queen Ltd: Queen Ltd sold land to King Ltd for $400,000, which was $100,000 above cost. The land was still hold by King Ltd. King Ltd sold an equipment to Queen Ltd for $400,000. The carrying amount of equipment to King Ltd of $320,000. Both entities depreciate equipment at a rate of 10% p.a. on cost. Queen Ltd sold inventories costing $160,000 to King Ltd for $180,000. 1/4th of the inventories were still on hand with King Ltd. King Ltd received $15,000 of service revenue from Queen Ltd. Queen Ltd paid dividend of $30,000 and interest on loan of $8,000 to King Ltd. The tax rate…
On 1 July 2019, Christina Ltd acquired all the issued shares of Adeline Ltd, paying $120 000 cash and transferring 100 000 of its own shares to Adeline Ltd’s former shareholders. At that date, the financial statements of Adeline Ltd showed the following information. Share Capital $100000 General Reserve 50000 Retained Earnings 150000 All the assets and liabilities of Adeline Ltd were recorded at amounts equal to their fair values at the acquisition date. The fair value of Christina Ltd’s shares at acquisition date was $2 per share. Christina Ltd incurred $30 000 in acquisition‐related costs that included $5000 as share issue costs. Required Prepare the acquisition analysis at 1 July 2019. Prepare the journal entries for Christina Ltd to recognise the investment in Adeline Ltd at 1 July 2019. Prepare the consolidation worksheet entries for…
On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows: Big Ltd ($) Small Ltd ($) Assets Cash 21,000 10,500 Accounts receivable 315,000 115,500 Land 420,000 210,000 Plant 1,680,000 1,050,000 Investment in Small Ltd 1,050,000 3,486,000 1,386,000 Liabilities Accounts payable 126,000 63,000 Loans payable 840,000 315,000 Shareholders’ equity Share capital 2,100,000 420,000 Retained earnings 420,000 588,000 3,486,000 1,386,000 Required: a.Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. b.Prepare consolidation journal entries. c.
ABC Ltd in Queensland acquired XYZ Ltd in Victoria. Specifically, on 1 July 2022, ABC Ltd acquired all the issued shares of XYZ Ltd for $180 000. The financial statements of XYZ Ltd showed the equity of XYZ Ltd at that date to be: Share capital $100000 General reserve $50000 Retained earnings $30000 All the assets and liabilities of XYZ Ltd were recorded at amounts equal to their fair values at that date. During the year ending 30 June 2023, XYZ Ltd undertook the following action. On 1 January 2023, transferred $10 000 from retained earnings existing at 1 July 2022 to the general reserve. Required Prepare the pre-acquisition entries at 1 July 2022. Prepare the pre-acquisition entries at 30 June 2023.
On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows: Big Ltd ($) Small Ltd ($) Assets Cash 21,000 10,500 Accounts receivable 315,000 115,500 Land 420,000 210,000 Plant 1,680,000 1,050,000 Investment in Small Ltd 1,050,000 3,486,000 1,386,000 Liabilities Accounts payable 126,000 63,000 Loans payable 840,000 315,000 Shareholders’ equity Share capital 2,100,000 420,000 Retained earnings 420,000 588,000 3,486,000 1,386,000 Required: a. Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. b. Prepare consolidation journal entries. c.
On 1 July 2019 Sugar Ltd acquired 90% of the shares of Glider Ltd for $565 240. At this date the equity of Glider Ltd consisted of share capital of $370 000 and retained earnings of $190 000. All the identifiable asset and liabilities of Glider Ltd were recorded at amounts equal to fair value except for: Carrying amount Fair Value Land Plant (cost $380 000) Inventories $180 000 $300 000 $25 000 $200 000 $330 000 $35 000 The plant was considered to have a further 10-year life. All the inventory was sold by 30 June 2020. The tax rate is 30%. Sugar Ltd uses the partial goodwill method. During the 2019-20 period Glider Ltd recorded a profit of $30 000. Required Prepare the consolidation worksheet entries for the preparation of the consolidated financial statements of Sugar Ltd at 30 June 2020.
A Company acquired the assets and assumed the liabilities of B Inc. on June 30, 2022. The consideration transferred by the acquirer were as follows: • Cash amounting to P2,000,000. • Issued 10,000 ordinary shares at P10 par with a market price of P15. • Issued 5 year interest bearing bonds payable with a face value of P3,000,000 with a nominal rate of 10% and effective interest of 12%. (use two decimal places for the present value factor) Acquisition related costs incurred were as follows: • Legal fees amounting to P120,000, 70% of which is not yet paid. • Share issue costs paid amounted to P15,000. • Bond Issue costs paid amounting to P120,000. The Balance Sheet of the two entities before acquisition were as follows: A Company B Inc.Total Assets 16,500,000 5,235,000Total Liabilities 2,500,000 500,000Ordinary Shares 5,000,000 1,250,000Share premium 1,500,000 750,000Retained Earnings 6/30/22 7,500,000 2,735,000It was determined that the book value of the assets and liabilities of the…