Sugar Ltd is looking to expand ts share of the market in confectionaries and has negotiated...
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Sugar Ltd is looking to expand ts share of the market in confectionaries and has negotiated to acquire the operations of Lollipop Ltd on 1 July 2015. At 1 July 2015 the Statement of Financial Position for Lollipop Ltd was as follows: Cash $ 20,400 Accounts receivable 42.600 Inventory 60,000 Land and buildings (net) 124,000 Plant and equipment (net) 210.000 1457.000 S 80,000 Accounts payable 80,000 Mortgage loan 300,000 Share capital ($2 ordinary shares fully paid) 17.000 Retained earnings $457.000 Sugar Ltd is to acquire all assets (except cash) of Lollpop Lid. Lolipop Ltd will go into liquidation after it pays all of its creditors The net assets of Lollipop Ltd are recorded at fair value except for the following Fair Value Inventory S 52,000 Land and Buildings 150,000 In exchange, the shareholders of Lollipop Ltd are to receive, for every three Lolipop Ltd shares held, one Sugar Ltd share worth 50 each. Additionally, Sugar Ltd will transfer to Lollipop Ltd its patent which has a fair value of $50,000 (and is recorded at this fair value in Sugar Ltd accounts). Sugar Ltd will also give Lolipop Ltd sufficient additional cash to enable Lollipop Ltd to pay all its liabilities. Required: a) Prepare an acquisition analysis of the above acquisition. b) Prepare the jounal entries to record the acquisition in the records of Sugar Ltd. (7 marks) Sugar Ltd is looking to expand ts share of the market in confectionaries and has negotiated to acquire the operations of Lollipop Ltd on 1 July 2015. At 1 July 2015 the Statement of Financial Position for Lollipop Ltd was as follows: Cash $ 20,400 Accounts receivable 42.600 Inventory 60,000 Land and buildings (net) 124,000 Plant and equipment (net) 210.000 1457.000 S 80,000 Accounts payable 80,000 Mortgage loan 300,000 Share capital ($2 ordinary shares fully paid) 17.000 Retained earnings $457.000 Sugar Ltd is to acquire all assets (except cash) of Lollpop Lid. Lolipop Ltd will go into liquidation after it pays all of its creditors The net assets of Lollipop Ltd are recorded at fair value except for the following Fair Value Inventory S 52,000 Land and Buildings 150,000 In exchange, the shareholders of Lollipop Ltd are to receive, for every three Lolipop Ltd shares held, one Sugar Ltd share worth 50 each. Additionally, Sugar Ltd will transfer to Lollipop Ltd its patent which has a fair value of $50,000 (and is recorded at this fair value in Sugar Ltd accounts). Sugar Ltd will also give Lolipop Ltd sufficient additional cash to enable Lollipop Ltd to pay all its liabilities. Required: a) Prepare an acquisition analysis of the above acquisition. b) Prepare the jounal entries to record the acquisition in the records of Sugar Ltd. (7 marks)
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Accounting
ISBN: 978-1118608227
9th edition
Authors: Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield, John Hoggett
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