Ling and Morwong are small family-owned companies engaged in vegetable growing and distribution. The

Spencer family owns the shares in Morwong and the Rokocoko family owns the shares in Ling. The head of the

Spencer family wishes to retire but his two sons are not interested in carrying on the family business. Accordingly, on

July 1, 2013, Ling is to take over the operations of Morwong, which will then liquidate. Ling is asset-rich but has limited overdraft facilities so the following arrangement has been made.

Ling is to acquire all of the assets, except cash, delivery trucks, and motor vehicles, of Morwong and will assume all of the liabilities except accounts payable. In return, Ling is to give the shareholders of Morwong a block of vacant land, two delivery vehicles, and sufficient additional cash to enable the company to pay off the accounts payable and the liquidation costs of $1,500. The land and vehicles had the following values at June 30, 2013:

On the liquidation of Morwong, Mr. Spencer is to receive the land and the motor vehicles and his two sons are to receive the delivery trucks.
The statements of financial position of the two companies as at June 30, 2013, were as follows:

All the assets of Morwong are recorded at fair value, with the exception of:
Fair value
Land.......... $120,000
Buildings.......... 40,000
Cultivation equipment..... 40,000
Motor vehicle........ 34,000
Required
(a) Prepare the acquisition analysis and the journal entries to record the acquisition of Morwong€™s operations in the records of Ling.
(b) Prepare the journal entries to record the liquidation of Morwong.
(c) Prepare the statement of financial position of Ling after the business combination, including any notes relating to the business combination.

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Carrying amount $50,000 30,000 Fair value $120,000 28,000 Land Delivery trucks Ling Cash Accounts receivable Land Buildings (net) Cultivation equipment (net) Irrigation equipment Delivery trucks Motor vehicles $ 3,500 25,000 250,000 25,000 65,000 16,000 45,000 25,000 $454,500 26,000 150,000 35,000 70,000 100,000 Morwong $ 2,000 15,000 100,000 30,000 46,000 22,000 36,000 32,000 283.000 23,500 80,000 35,000 52,500 Accounts payable LoanBank of NB Loan- Farinacci Bros Loan Long Cloud Share capita100,000 shares 60,000 shares 60,000 Retained earnings 73,500 32,000 $283,000 454,50