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(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital Reserves - 100 000 shares Carrying amount $ 1 000 000 $ 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 980 000 4 220 000 5 200 000 500 000 $4 700 000 Red Ltd In exchange for these net assets, Red Ltd agreed to: issue 10 Red Ltd shares for every Black Ltd share - shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd - the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.

(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital Reserves - 100 000 shares Carrying amount $ 1 000 000 $ 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 980 000 4 220 000 5 200 000 500 000 $4 700 000 Red Ltd In exchange for these net assets, Red Ltd agreed to: issue 10 Red Ltd shares for every Black Ltd share - shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd - the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital - Reserves - 100 000 shares ● Carrying amount $ 1 000 000 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 In exchange for these net assets, Red Ltd agreed to: $ 980 000 4 220 000 5 200 000 500 000 $4 700 000 issue 10 Red Ltd shares for every Black Ltd share - Red Ltd shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.
Transcribed Image Text:(A) Red Ltd acquired all the assets and liabilities of Black Ltd on 1 July 2020. At this date, the assets and liabilities of Black Ltd consisted of: Fair value Current assets Non-current assets Liabilities Share capital - Reserves - 100 000 shares ● Carrying amount $ 1 000 000 4 000 000 5 000 000 500 000 $4 500 000 $3 000 000 1 500 000 $4 500 000 In exchange for these net assets, Red Ltd agreed to: $ 980 000 4 220 000 5 200 000 500 000 $4 700 000 issue 10 Red Ltd shares for every Black Ltd share - Red Ltd shares were considered to have a fair value of $15 per share; costs of share issue were $7 500 transfer a patent to the former shareholders of Black Ltd the patent was carried in the records of Red Ltd at $450 000 but was considered to have a fair value of $1 million pay $6.00 per share in cash to each of the former shareholders of Black Ltd. Red Ltd incurred $15 000 in costs associated with the acquisition of these net assets. Required 1. Prepare the acquisition analysis. 2. Prepare the journal entries in Red Ltd to record the acquisition at 1 July 2020.
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