Reference no: EM132726188
On 1 July 2020, Sydney Ltd took control of the assets and liabilities of Perth Ltd. At this date the statement of financial position of Perth Ltd was as follows:
Carrying amount Fair value
Machinery $40,000 $67,000
Fixtures & fittings 60,000 68,000
Vehicles 35,000 35,000
Current assets 10,000 12,000
Current liabilities (16,000) (18,000)
Total net assets $129,000
Share capital (80 000 shares at $1.00 per share) 80,000
General reserve 20,000
Retained earnings 29,000
Total equity $129,000
Problem 1: Prepare the journal entries in the records of Sydney Ltd at 1 July 2020 in the following situation, assuming the costs of issuing the shares by Sydney Ltd cost $1,600.
a. Sydney Ltd issued 80,000 shares having a fair value of $2.40 per share in exchange for the net assets of Perth Ltd