Prepare the general journal entries to record the purchase

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Reference no: EM13858936

Financial accounting exercises for intangibles.

A ltd acquired all the assets and liabilities of B ltd on 1 July 2014. At the date of acquisition, the carrying amount of B ltd identifiable net assets and their fair values are listed below.

 

Carrying amount

Fair values

Cash

20,000

20,000

Account receivable

800,000

780,000

Provision for doubtful debts

-10,000

-5,000

Inventory

1,600,000

1,480,000

Property, plant and equipment

2,100,000

1,800,000

Accumulated depreciation PP&E

-700,000

 

Account payable

900,000

 

Provision for long service leave

-140,000

-190,000

In addition, due diligence identified patents that were valued by an expert at $350,000, a customer list at $150,000 and contingent liabilities were reliably measured at $200,000. The price paid was $4,000,000 and did not include the legal costs of the business combination which were $80,000.

Required

Prepare the general journal entries to record the purchase by A Ltd under AASB 3 Business Combinations and the payments to B Ltd. Narrations are not required.

Reference no: EM13858936

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