Reference no: EM133064742
Question 1:
On 30 June 20X9, Fey Ltd purchased a parcel of assets and liabilities directly from Pohler Ltd.
The cost of acquisition was $140 000 cash.
The financial information of Pohler Ltd as at 30 June 20X9 is as follows:
|
Item
|
Note
|
Cost
$
|
Carrying amount
$
|
Fair value
$
|
|
Accounts receivable
|
|
60 000
|
40 000
|
35 000
|
|
Inventory
|
|
70 000
|
70 000
|
70 000
|
|
Equipment
|
|
80 000
|
65 000
|
50 000
|
|
Patent
|
1
|
-
|
-
|
35 000
|
|
Accounts payable
|
|
(50 000)
|
(50 000)
|
(50 000)
|
|
Contingent liability
|
2
|
-
|
-
|
(10 000)
|
|
Net assets
|
|
160 000
|
125 000
|
130 000
|
Notes:
1. The patent is an internally generated asset that does not qualify for recognition in Pohler's financial statement under AASB 138 Intangible Assets. The fair value of the patent has been assessed at $35 000.
2. At 30 June 20X9 Pohler has a legal action pending relating to a damages claim made against them by a former client. No provision for settlement of this legal claim has been recognised in Pohler's financial statements in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, but the fair value of the liability for the purposes of AASB 3 Business Combinations, has been assessed at $10 000.
Required:
Assuming that the assets and liabilities of Pohler does not constitute a business, prepare the journals entries for the acquisition by Fey Ltd.
Question 2:
The facts below are the same as lecture example 1.
On 30 June 20X9, Fey Ltd purchased a parcel of assets and liabilities directly from Pohler Ltd.
The cost of acquisition was $140 000 cash.
The financial information of Pohler Ltd as at 30 June 20X9 is as follows:
|
Item
|
Note
|
Cost
$
|
Carrying amount
$
|
Fair value
$
|
|
Accounts receivable
|
|
60 000
|
40 000
|
35 000
|
|
Inventory
|
|
70 000
|
70 000
|
70 000
|
|
Equipment
|
|
80 000
|
65 000
|
50 000
|
|
Patent
|
1
|
-
|
-
|
35 000
|
|
Accounts payable
|
|
(50 000)
|
(50 000)
|
(50 000)
|
|
Contingent liability
|
2
|
-
|
-
|
(10 000)
|
|
Net assets
|
|
160 000
|
125 000
|
130 000
|
Notes:
1. The patent is an internally generated asset that does not qualify for recognition in Pohler's financial statement under AASB 138 Intangible Assets. The fair value of the patent has been assessed at $35 000.
2. At 30 June 20X9 Pohler has a legal action pending relating to a damages claim made against them by a former client. No provision for settlement of this legal claim has been recognised in Pohler's financial statements in accordance with AASB 137 Provisions, Contingent Liabilities and Contingent Assets, but the fair value of the liability for the purposes of AASB 3 Business Combinations, has been assessed at $10 000.
Required:
Assuming that the assets and liabilities of Pohler do constitute a business, prepare the journals entries for the acquisition by Fey Ltd.
Question 3:
Acquisition of a company for cash and shares
• Reid Ltd acquired 80 per cent of the ordinary shares of Campbell Ltd on 1 July 20X2.
• Shares of Reid were trading at $1.43 on the ASX.
• Campbell shares were trading at $2.22.
|
REID LTD
Balance sheet as at 30 June 20X2
|
|
|
|
$
|
|
Assets
|
|
|
Bank
|
250 000
|
|
Other assets
|
600 000
|
|
Net assets
|
|
|
|
850 000
|
|
Equity
|
|
|
Share capital
|
|
|
500 000 ordinary shares, fully paid
|
500 000
|
|
Retained profits
|
350 000
|
|
Total Equity
|
|
|
|
850 000
|
|
CAMPBELL LTD
Balance sheet as at 30 June 20X2
|
|
|
|
$
|
|
Assets
|
|
|
Bank
|
20 000
|
|
Other assets
|
300 000
|
|
Total assets
|
320 000
|
|
Liabilities
|
|
|
Creditors
|
100 000
|
|
Net assets
|
220 000
|
|
Equity
|
|
|
Share capital
|
|
|
100 000 ordinary shares, fully paid
|
100 000
|
|
Retained profits
|
120 000
|
|
Total Equity
|
220 000
|
• Campbell's financial position items were considered to be at fair values.
• The cost of acquisition for Reid Ltd was $1 cash plus one share in Reid for every one share acquired in Campbell.
Calculate cost of acquisition for Reid Ltd