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