On 1 July 2018, David Ltd acquired all of the assets and liabilities of Penny Ltd. In
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Question:
On 1 July 2018, David Ltd acquired all of the assets and liabilities of Penny Ltd. In exchange for these assets and liabilities, David Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1 000. Legal costs associated with the acquisition of Penny Ltd amounted to $1 200.
The asset and liabilities of Penny Ltd at 1 July 2018 were as follows:
| Carrying amount | Fair value |
Assets | | |
Cash | $2 000 | $2 000 |
Accounts receivable | 10 000 | 10 000 |
Inventory | 64 000 | 68 000 |
Equipment | 320 000 | 232 000 |
Accumulated depreciation – equipment | (96 000) | — |
Patents | 240 000 | 280 000 |
Liabilitie s | | |
Accounts payable | (16 000) | (16 000) |
Debentures | (64 000) | (64 000) |
Required
A. Prepare the acquisition analysis at 1 July 2018 for the acquisition of Penny Ltd by David Ltd.
B. Prepare the journal entries in the records of David Ltd at 1 July 2018.
Related Book For
Financial Accounting
ISBN: 978-0078025556
8th edition
Authors: Robert Libby, Patricia Libby, Daniel Short
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