On 1 July 2021 Charlotte’s Bridal Wear Ltd acquired all the assets and liabilities of a rival Wedding supplier (Here 4U Pty Ltd). The following information is relevant to Charlotte’s Bridal Wear Ltd’s purchase:

The assets and liabilities of Here 4U Ltd at the date of acquisition consisted of :

Furniture and Fittings	24000
Accumulated depreciation- Furniture and Fittings	8000
Land	250000
Buildings	310000
Accumulated depreciation- Buildings	93000
Inventory	88000
Accounts receivable	7500
Accounts payable	1230

It was assessed that the assets and liabilities of Here 4U Pty Lty represent fair values except for the following. Appropriate fair values are estimated to be:

Furniture and Fittings	15000
Inventory	80000

1. Here 4U Pty Ltd also has an internally generated brand that is not shown in the accounting records. Charlotte’s Bridal Wear Ltd estimates that this brand has a fair value of $30000.
2. In consideration of the purchase, Charlotte’s Bridal Wear Ltd has agreed to transfer 200000 shares to the shareholders of Here 4U Ltd. The share price of Charlotte’s Bridal Wear Ltd’s shares at 1 July 2021 was $ 1.20. Share issue costs incurred by Charlotte’s Bridal Wear Ltd amount to $2000. In addition, Charlotte’s Bridal Wear Ltd agreed to transfer $ 400000 cash to be paid on 2 August 2021.
3. Legal costs incurred by Charlotte’s Bridal Wear Ltd to prepare the sale agreement amount to $5000.

Required

Prepare the journal entries in Charlotte’s Bridal Wear Ltd to record the acquisition of Here 4U Pty Ltd under AASB 3 Business Combinations.

Answer rating: 100% (QA)

Answer Computation of total fair value of net identifiable assets 1... View the full answer