Reference no: EM133069998

Question - Domino Ltd negotiated with Checkers Ltd to acquire the business of Checkers Ltd, after which Checkers Ltd would go into liquidation. The acquisition date was 1 March 2021. At that date, Checkers Ltd reported the following:

	Carrying amounts 1 March 2021 $	Fair Values 1 March 2021 $
Assets
Cash	19,000	19,000
Accounts receivable (net)	70,000	70,000
Inventories	80,000	65,000
Land	153,000	200,000
Plant	260,000	180,000
Accumulated depreciation - plant	(60,000)	-
Total assets	522,000	-
Liabilities
Accounts payable	47,500	47,500
Provision for employee benefits	20,500	22,500
Current tax liability	17,000	17,000
Bank Loan	70,000	70,000
Debentures (5%)	50,000	50,000
Total liabilities	205,000	-
Net assets	$317,000	-
Equity
Share capital ($2 ordinary shares)	240,000	-
Retained earnings	77,000	-
Total equity	$317,000	-

Domino Ltd agreed to acquire all assets (except for cash) and assume all liabilities (except for the current tax liability and debentures) of Checkers Ltd.

In exchange, Domino Ltd would transfer the following to Checkers Ltd:

A block of land valued at $160,000 on acquisition date (carrying amount on this date in Domino Ltd accounts $155,000).

Issue three (3) Domino Ltd shares for every five (5) Checkers Ltd shares. Domino Ltd shares are valued at $2.80 on acquisition date.

Sufficient additional cash to that already held by Checkers Ltd, so that Checkers Ltd can pay off remaining liabilities (debentures to be redeemed at 5%) and liquidation costs of $2,900.

Required -

a) Prepare an acquisition analysis for Domino Ltd's acquisition of Checkers Ltd business on 1 March 2021.

b) Prepare the necessary journal entries in the accounts of Domino Ltd for the acquisition of Checkers Ltd on 1 March 2021.