You will prepare an acquisition analysis for both the business Acquisition and Acquisition as a wholly-owned subsidiary in accordance with the relevant AASB Accounting Standard.

All assets and liabilities of WGA are at fair value with the following exceptions: Inventory has a fair value of $ 24000 and Plant & Machinery has a fair value of $65000 plus there is an internally generated patent with a fair value of $20000.

Required

i. Acquisition Analysis: Business Combination

The consideration for the acquisition comprises issue of 50000 shares with a fair value of $2.00 each plus cash of $60000 payable 80% at the time of acquisition and 20% in 12 months' time (you can ignore any adjustment for present value in this example).

ii. If the shares had a fair value of $1.50 per share and the cash component of the consideration remained the same, explain how the acquisition journal entry would differ.

iii. Acquisition Analysis: Wholly Owned Subsidiary.

FPK acquired 100% of share capital of WGA for $150000 cash.

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Flat Pack Kitchens Ltd (FPK) has a strategy to expand their operations to provide a complete kitchen solution for their customers. FPK have identified a complementary company, White Goods Australia Ltd (WGA). FPK is considering acquiring WGA Ltd.to guarantee quality of delivery times of this essential part of the kitchen solution. Statement of Financial Position As at 30 June 2021 (pre acquisition) FPK Ltd $'000 WGA Ltd $'000 Assets Cash $ 112 000 $ 24 000 Accounts receivable 18 000 20 000 Inventory (at cost) 43 000 27 000 Plant and machinery (at cost) 75 000 80 000 Accumulated depreciation on plant and machinery (34 000) (19 000) Total assets $214 000 $132 000 Liabilities Bank Loan 120 000 Accounts payable 42 000 12 000 162 000 12 000 $ 52 000 $ 120 000 40 000 shares $ 40 000 90 000 shares $ 90 000 10 000 12 000 20 000 52 000 120 000 Net Assets Share capital General reserve Retained earnings Total Capital Flat Pack Kitchens Ltd (FPK) has a strategy to expand their operations to provide a complete kitchen solution for their customers. FPK have identified a complementary company, White Goods Australia Ltd (WGA). FPK is considering acquiring WGA Ltd.to guarantee quality of delivery times of this essential part of the kitchen solution. Statement of Financial Position As at 30 June 2021 (pre acquisition) FPK Ltd $'000 WGA Ltd $'000 Assets Cash $ 112 000 $ 24 000 Accounts receivable 18 000 20 000 Inventory (at cost) 43 000 27 000 Plant and machinery (at cost) 75 000 80 000 Accumulated depreciation on plant and machinery (34 000) (19 000) Total assets $214 000 $132 000 Liabilities Bank Loan 120 000 Accounts payable 42 000 12 000 162 000 12 000 $ 52 000 $ 120 000 40 000 shares $ 40 000 90 000 shares $ 90 000 10 000 12 000 20 000 52 000 120 000 Net Assets Share capital General reserve Retained earnings Total Capital

Answer rating: 100% (QA)

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