On 1 July 2020 Annie Ltd acquired all the shares of Patricia Ltd for $427,000.The equity of Patricia Ltd at 1 July 2016 was: Share capital $270,000 Retained Earnings 90,000 General reserve 20,000 At 1 July 2016 all the identifiable assets and liabilities were stated at fair value except for the following : Carrying value Fair value Inventory 80,000 82,000 Machinery ( cost $150,000) 100,000 96,000 Land 150,000 185,000 At acquisition date Patricia Ltd had a patent which it had acquired for $35,000 which now had a fair value of $26,000 . Patricia Ltd also had a contingent liability of $20,000 which had a fair value of $16,000 .The liability was settled in September 2020. Both companies pay tax at 30%. 

Required: 

Prepare all necessary adjusting journal entries and acquisition entries including fair value adjustments assuming Annie will be preparing consolidated accounts .

Answer rating: 100% (QA)

Step 1 An acquisition is when one company purchases most or all o... View the full answer