Reference no: EM131606294

Problem - Russell Ltd acquired all the assets and liabilities of Davies Ltd on 1 July 2018. At this date, the assets and liabilities of Davies Ltd consisted of:

	Carrying amount	Fair value
Current assets	$1 000 000	$980 000
Non-current assets	4 000 000	4 220 000
	5 000 000	5 200 000
Liabilities	500 000	500 000
	$4 500 000	$4 700 000
Share capital - 100 000 shares	$3 000 000	$ 4 700 000
Reserves	1 500 000
	$4 500 000

In exchange for these net assets, Russell Ltd agreed to:

• issue 10 Russell Ltd shares for every Davies Ltd share - Russell Ltd shares were considered to have a fair value of $10 per share; costs of share issue were $500
• transfer a patent to the former shareholders of Davies Ltd - the patent was carried in the records of Russell Ltd at $350 000 but was considered to have a fair value of $1 million
• pay $5.20 per share in cash to each of the former shareholders of Davies Ltd.
• Russell Ltd incurred $10 000 in costs associated with the acquisition of these net assets.

Required -

1. Using excel prepare the acquisition analysis.

2. Prepare the journal entries in Russell Ltd to record the acquisition at 1 July 2018.