1: Prepare the acquisition analysis as at 1 July 20x3 for the acquisition of B Ltd by A Ltd. Show all calculations. 
Q2: Prepare the journal entries for these transactions in the records of A Ltd,  

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On 1 July 20x3, A Ltd acquired all the assets and liabilities of B Ltd. Details of B Ltd's assets and liabilities acquired by A Ltd are as follows: Plant & equipment Land Inventory Accounts receivable Accounts payable Bank overdraft Net assets B Ltd is currently being sued by a previous customer. The expected damages are $40,000. Lawyers estimate that there is a 30% chance of losing the case. B Ltd has internally generated a trademark with a fair value of $125,000 which it has not recognised in its accounts. Details of the consideration transferred are as follows: Periods • Cash of $600,000, $300,000 to be paid on 1 July 20x3, with the balance due on 1 July 20x4. The incremental borrowing rate for A Ltd is 8% • 120,000 shares in A Ltd were issued. The share price on 1 July 20x3 was $1.20 per share. This price represented a six-month high. Costs of issuing the shares was $1,000. • Due to doubts as to whether the share price would remain at or above the $1.20 level, A Ltd agreed to supply cash to the value of any decrease in the share price below $1.20. This guarantee was valid for a period of 3 months (to 30 September 20x3). A Ltd believed that there was a 60% chance that the share price would remain at or above $1.20 until 30 September 20x3 (and a 40% chance that it would fall to $1.00) • Supply of a patent to B Ltd. The fair value of the patent is $60,000. As the patent was internally generated it has not been recognised in A Ltd's books. • Legal fees and associated costs relating to the acquisition totalled $5,000. Present Value of $1 1 IN 2 8% 0.9259 0.8573 CA $ 320,000 250,000 24,000 18,000 FV $ 325,000 261,000 30,000 16,000 (35,000) (35,000) (55,000) (55,000) 522.000 542,000 9% Rate per period 0.9174 0.8417 10% 0.9091 0.8264 11% 0.9009 0.8116 On 1 July 20x3, A Ltd acquired all the assets and liabilities of B Ltd. Details of B Ltd's assets and liabilities acquired by A Ltd are as follows: Plant & equipment Land Inventory Accounts receivable Accounts payable Bank overdraft Net assets B Ltd is currently being sued by a previous customer. The expected damages are $40,000. Lawyers estimate that there is a 30% chance of losing the case. B Ltd has internally generated a trademark with a fair value of $125,000 which it has not recognised in its accounts. Details of the consideration transferred are as follows: Periods • Cash of $600,000, $300,000 to be paid on 1 July 20x3, with the balance due on 1 July 20x4. The incremental borrowing rate for A Ltd is 8% • 120,000 shares in A Ltd were issued. The share price on 1 July 20x3 was $1.20 per share. This price represented a six-month high. Costs of issuing the shares was $1,000. • Due to doubts as to whether the share price would remain at or above the $1.20 level, A Ltd agreed to supply cash to the value of any decrease in the share price below $1.20. This guarantee was valid for a period of 3 months (to 30 September 20x3). A Ltd believed that there was a 60% chance that the share price would remain at or above $1.20 until 30 September 20x3 (and a 40% chance that it would fall to $1.00) • Supply of a patent to B Ltd. The fair value of the patent is $60,000. As the patent was internally generated it has not been recognised in A Ltd's books. • Legal fees and associated costs relating to the acquisition totalled $5,000. Present Value of $1 1 IN 2 8% 0.9259 0.8573 CA $ 320,000 250,000 24,000 18,000 FV $ 325,000 261,000 30,000 16,000 (35,000) (35,000) (55,000) (55,000) 522.000 542,000 9% Rate per period 0.9174 0.8417 10% 0.9091 0.8264 11% 0.9009 0.8116

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1 Acquisition Analysis as of July 1 20x3 Consideration Transferred Cash 600000 Shares in A Ltd 12000... View the full answer