On 1 July 2020, B Ltd acquired all the assets and liabilities of P Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $4.50 per share. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Pitt Ltd amounted to $3,200. The asset and liabilities of P Ltd at 1 July 2020 were as follows (Extract): Assets Carrying Amount Fair Value Cash $ 3 000 - Account Receivable 12 000 $ 12 000 Inventories 63 000 69 000 Plant and equipment 330 000 225 000 Accumulated Depreciation – plant and Equipment (100 000) - Land 200 000 280 000 Liabilities Accounts payable 22 000 22 000 Debentures 68 000 68 000 Required: a) Prepare the acquisition analysis at 1 July 2020 for the acquisition of P Ltd by B Ltd. Assume that at 30 June 2020, P Ltd had reported a contingent liability relating to a guarantee given by that company to another entity. P Ltd did not record the guarantee as a liability because of the difficulty of measuring the liability. The fair value of this contingent liability was assessed as $14 000.
Business Combination - Accounting for an acquirer)
On 1 July 2020, B Ltd acquired all the assets and liabilities of P Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100,000 shares that at date of issue had a fair value of $4.50 per share. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Pitt Ltd amounted to $3,200.
The asset and liabilities of P Ltd at 1 July 2020 were as follows (Extract):
|
|
|
|
|
Assets |
Carrying Amount |
Fair Value |
|
Cash |
$ 3 000 |
- |
|
|
12 000 |
$ 12 000 |
|
Inventories |
63 000 |
69 000 |
|
Plant and equipment |
330 000 |
225 000 |
|
|
(100 000) |
- |
|
Land |
200 000 |
280 000 |
|
Liabilities |
|
|
|
Accounts payable |
22 000 |
22 000 |
|
Debentures |
68 000 |
68 000 |
Required:
a) Prepare the acquisition analysis at 1 July 2020 for the acquisition of P Ltd by B Ltd. Assume that at 30 June 2020, P Ltd had reported a
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