Question: Billiardco a supplier of snooker equipment agreed to acquire the

Billiardco, a supplier of snooker equipment, agreed to acquire the business of a rival firm, Qtech Ltd., taking over all assets and liabilities as at June 1, 2013.
The price agreed on was $60,000, payable $20,000 in cash and the balance by the issue to the selling company of 16,000 shares in Billiardco, these shares having a fair value of $2.50 per share.
The trial balances of the two companies as at June 1, 2013, were as follows:
All the identifiable net assets of Qtech were recorded by Qtech at fair value except for the inventory, which was considered to be worth $28,000 (assume no tax effect). The plant had an expected remaining life of five years.
The business combination was completed and Qtech went into liquidation. Costs of liquidation amounted to $1,000.
Billiardco incurred incidental costs of $500 in relation to the acquisition. Costs of issuing shares in Billiardco were $400.
(a) Prepare the journal entries in the records of Billiardco to record the business combination.
(b) Show the statement of financial position of Billiardco after completion of the business combination.
(c) On July 31, 2013, Billiardco became aware that there had been an error in measuring the fair value of the plant at
June 1, 2013. It had in fact a fair value at that date of $36,000. Explain how Billiardco is required to adjust for that error. Billiardco’s reporting period ends on June 30.

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  • CreatedJune 09, 2015
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