On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Pitt Ltd amounted to $1200. The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows: Carrying amount Fair value Assets Cash $2000 $2000 Accounts receivable 10000 10000 Inventories 64000 64000 Equipment 320000 232000 Accumulated depreciation- equipment (96000) -- Patents 240000 280000 Liabilities Accounts Payable (16000) (16000) Debentures (64000) (64000) Required Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd. Prepare the journal entries in the records of Brad Ltd at 1 July 2019. Prepare the journal entries in the records of Brad Ltd assuming that the shares issued by Brad Ltd had a fair value of $4.80.
Accounting at acquisition date by the acquirer
On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Pitt Ltd amounted to $1200.
The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows:
Carrying amount Fair value
Assets
Cash $2000 $2000
Inventories 64000 64000
Equipment 320000 232000
Patents 240000 280000
Liabilities
Accounts Payable (16000) (16000)
Debentures (64000) (64000)
Required
- Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.
- Prepare the
journal entries in the records of Brad Ltd at 1 July 2019. - Prepare the journal entries in the records of Brad Ltd assuming that the shares issued by Brad Ltd had a fair value of $4.80.
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