Reference no: EM132979470
Takeover of existing business, issue of ordinary shares, statement of financial position
Dandino Ltd was formed on 1 March 2020 for the purpose of purchasing the business of Verama Ltd whose assets and liabilities at that date were as shown below.
Assets
Freehold land $ 30 000
Buildings 180 000
Machinery 70 000
Supplies 45 000
Accounts receivable 120 000
Inventory 190 000
Liabilities
Mortgage payable 70 000
Accounts payable 85 000
Additional information
1. Dandino Ltd agreed that the fair values of all assets and liabilities taken over were equal to carrying amounts with the exception of the following.
- Freehold land was to be valued at $80 000, buildings to be valued at $120 000, accounts receivable to be taken over at $100 000 and inventory to be valued at $180 000.
- The purchase price was $500 000 and, in satisfaction thereof, the vendors were to receive $400 000 in fully paid ordinary shares and the balance in cash. The fair value of each ordinary share is $2.
2. The company offered for public subscription 300 000 ordinary shares to be paid in full on 31 March.
3. Applications were received for 320 000 shares. All money due was received on application.
4. On 30 April, the directors allotted 300 000 shares and any excess application money received was returned to unsuccessful applicants.
5. Verama Ltd was paid, according to the agreement, on 15 May 2020.
Required
Problem (a) Record all the above transactions in general journal form in the accounts of Dandino Ltd up to 30 June 2020.
Problem (b) Provide the statement of financial position for Dandino Ltd as at 30 June 2020 in accordance with the requirements of IAS 1/AASB 101.