Reference no: EM133061142

Question - On 1 July 2020, B Ltd acquired all the assets and liabilities of P Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $4.50 per share. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Pitt Ltd amounted to $3,200.

The asset and liabilities of P Ltd on 1 July 2019 were as follows (Extract):

	Carrying Amount	Fair Value
Assets
Cash	$3,000	-
Account Receivable	12,000	$12,000
Inventories	63,000	69,000
Plant and equipment	330,000	225,000
Accumulated Depreciation - plant and Equipment	(100,000)	-
Land	200,000	280,000
Liabilities
Accounts payable	22,000	22,000
Debentures	68,000	68,000

Required -

a) Prepare the acquisition analysis on 1 July 2020 for the acquisition of P Ltd by B Ltd. Assume that at 30 June 2020, P Ltd had reported a contingent liability relating to a guarantee given by that company to another entity. P Ltd did not record the guarantee as a liability because of the difficulty of measuring the liability. The fair value of this contingent liability was assessed as $14,000.

b) Prepare the journal entries in the records of B Ltd on 1 July 2020.