Question: Zanadu Ltd and Corion Ltd are two family owned ax producing companies

Zanadu Ltd. and Corion Ltd. are two family-owned flax-producing companies in Manitoba. Zanadu is owned by the Wood family and the Malak family owns Corion. The Wood family has only one son and he is engaged to be married to the daughter of the Malak family. Because the son is currently managing Corion, it is proposed that, after the wedding, he should manage both companies. As a result, it is agreed by the two families that Zanadu should take over the net assets of Corion.
The statement of financial position of Corion immediately before the takeover is as follows:
The takeover agreement specified the following details:
• Zanadu is to acquire all the assets of Corion except for cash and one of the vehicles (having a carrying amount of $45,000 and a fair value of $48,000), and assume all the liabilities except for the loan from the Regal Bank. Corion is then to go into liquidation. The vehicle is to be transferred to Mr. and Mrs. Malak.
• Zanadu is to supply sufficient cash to enable the debt to the Regal Bank to be paid off and to cover the liquidation costs of $5,500. It will also give $150,000 to be distributed to Mr. and Mrs. Malak to help pay the costs of the wedding.
• Zanadu is also to give a piece of its own prime land to Corion to be distributed to Mr. and Mrs. Malak, this eventually being available to be given to any offspring of the forthcoming marriage. The piece of land in question has a carrying amount of $80,000 and a fair value of $220,000.
• Zanadu is to issue 100,000 shares, with a fair value of $14 per share, to be distributed via Corion to the soon-to-be-married daughter of Mr. and Mrs. Malak, who is currently a shareholder in Corion.
The takeover proceeded per the agreement, with Zanadu incurring incidental acquisition costs of $25,000 and $18,000 share issue costs.
Prepare the acquisition analysis and the journal entries to record the acquisition of Corion in the records of Zanadu.

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  • CreatedJune 09, 2015
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