Jethro Ltd, a supplier of music records and equipment, agreed to acquire the business of a rival company, Tull Ltd, taking over all assets and liabilities as at 1 June 2020. The price agreed on was $345,000, payable $300,000 in cash and the balance by the issue to the selling company of 45,000 fully paid shares in Jethro Ltd, these shares having a fair value of $1.00 per share. The trial balances of the two companies as at 1 June 2020 were as follows. Jethro Tull Dr Cr Dr Cr Share capital Retained earnings Accounts payable 2,000,000 600,000 550,000 340,000 430,000 650,000 Cash 550,000 Equipment (net) Inventory Accounts receivable Borrowings Goodwill 460,000 370,000 830,000 625,000 425,000 260,000 140,000 50,000 1,250,000 2,890,000 2,890,000 1,250,000 All the identifiable net assets of Tull Ltd were recorded by Jethro Ltd at fair value except for the inventories, which were considered to be worth $210,000 (assume no tax effect). The plant had an expected remaining life of 6 years. Required a. Prepare the acquisition analysis for Taylor Limited, b. Prepare the journal entries in the records of Taylor Ltd to record the business comhination

Jethro Ltd, a supplier of music records and equipment, agreed to acquire the business of a rival company, Tull Ltd, taking over all assets and liabilities as at 1 June 2020. The price agreed on was $345,000, payable $300,000 in cash and the balance by the issue to the selling company of 45,000 fully paid shares in Jethro Ltd, these shares having a fair value of $1.00 per share. The trial balances of the two companies as at 1 June 2020 were as follows. Jethro Tull Dr Cr Dr Cr Share capital Retained earnings Accounts payable 2,000,000 600,000 550,000 340,000 430,000 650,000 Cash 550,000 Equipment (net) Inventory Accounts receivable Borrowings Goodwill 460,000 370,000 830,000 625,000 425,000 260,000 140,000 50,000 1,250,000 2,890,000 2,890,000 1,250,000 All the identifiable net assets of Tull Ltd were recorded by Jethro Ltd at fair value except for the inventories, which were considered to be worth $210,000 (assume no tax effect). The plant had an expected remaining life of 6 years. Required a. Prepare the acquisition analysis for Taylor Limited, b. Prepare the journal entries in the records of Taylor Ltd to record the business comhination

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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