Kite Ltd acquired all of the assets and liabilities of Cloud Ltd on 1 July 2022. The
Question:
Kite Ltd acquired all of the assets and liabilities of Cloud Ltd on 1 July 2022. The following are the terms of the acquisition:
Kite Ltd will provide $350,000 in cash.
The shareholders of Cloud will receive 2 fully paid shares in Kite Ltd for every share held in Cloud Ltd. For those shareholders who do not wish to take up this option will receive $1.85 for every share held in Cloud Ltd paid to them in cash. Holders of 60,000 shares decided to take the cash option.
The shares issued in Kite Ltd on the acquisition date had a fair value of $2.25 per share.
Loan with the West Bank was paid out with funds provided by Kite Ltd.
Legal costs relating to the acquisition totalled $25,000.
The fair value of the following assets and liabilities in Cloud Ltd at 1 July 2022 were:
inventory $240,000,
accounts receivable $335,000,
equipment $620,000,
trademarks $350,000, and
accounts payable $300,000.
The Statement of financial position of Cloud Ltd on 1 July 2022 is presented below:
Required:
Calculate the cost of acquisition of Cloud Ltd to Kite Ltd.
Show the items purchased in Cloud Ltd and provide a total
What is the difference on acquisition? What does this amount represent? Show your workings.
Record the journal entry for the acquisition that will appear in the accounts of Kite Ltd.
What are the measurement rules for goodwill?
Expert Answer:
Lets calculate the cost of acquisition step by step Cash payment 350000 Share issuance Number of shares issued Number of shares held in Cloud Ltd Exch... View the full answer
