The financial statements of a ltd and b ltd at 1 july 2020 are as follows.   A Ltd B Ltd cash 25000   plant 60000 35000 Accumulated depreciation (15000) (120000) inventories 12000 24000 Account receivable 20000 36000 goodwill 0 10000 Total assets 102600 117000 Account payable 1800 17000 Net assets 100800 100000 Share capital     Retained earnings 50000 81000 General reserve 8800 4000 Total equity 2000 15000   100800 100000   All the assets and liabilities of B Ltd were recorded for fair value except for the following assets. Plant 47000(Fair value) Inventory 22000(Fair value) A Ltd agreed to pay B Ltd $6000 in cash plus 16000 fully paid shares having a fair value of $7.5 per share. The business combination was completed and B ltd  liquidation. Cash of liquidation amounted to $1200. A Ltd incurred legal and accounting costs amounted to $482 in relation to the business combination. Cost of issuing the A Ltd shares were $330. On 30 June 2020 B Ltd had reported a contingent liability relating to the guarantee given by that company to another entity , B Ltd did not record the guarantee as a liability because of the difficulty of measuring the liability. The fair value of the contingent liability was assessed as $15,000. Required:  Prepare the journal entries in A Ltd to record the business combination.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The financial statements of a ltd and b ltd at 1 july 2020 are as follows.

 

A Ltd

B Ltd

cash

25000

 

plant

60000

35000

Accumulated depreciation

(15000)

(120000)

inventories

12000

24000

Account receivable

20000

36000

goodwill

0

10000

Total assets

102600

117000

Account payable

1800

17000

Net assets

100800

100000

Share capital

 

 

Retained earnings

50000

81000

General reserve

8800

4000

Total equity

2000

15000

 

100800

100000

 

All the assets and liabilities of B Ltd were recorded for fair value except for the following assets.

Plant 47000(Fair value)

Inventory 22000(Fair value)

A Ltd agreed to pay B Ltd $6000 in cash plus 16000 fully paid shares having a fair value of $7.5 per share. The business combination was completed and B ltd  liquidation.

Cash of liquidation amounted to $1200.

A Ltd incurred legal and accounting costs amounted to $482 in relation to the business combination.

Cost of issuing the A Ltd shares were $330.

On 30 June 2020 B Ltd had reported a contingent liability relating to the guarantee given by that company to another entity , B Ltd did not record the guarantee as a liability because of the difficulty of measuring the liability. The fair value of the contingent liability was assessed as $15,000.

Required: 

Prepare the journal entries in A Ltd to record the business combination.

 

 

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