On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the statement of financial position of Syd Ltd was as follows: RequiredPrepare the journal entries in the records of Mel Ltd at 1 July 2021 in each of the following situations, assuming the costs of issuing the shares by Mel Ltd cost $1600. Mel Ltd issued 80 000 shares having a fair value of $2.40 per share in exchange for the net assets of Syd Ltd Mel Ltd issued 80 000 shares having a fair value of $2.00 per share in exchange for the net assets of Syd Ltd. Mel Ltd acquired the shares of Syd Ltd. The agreement was that Mel Ltd would pay the shareholders of Syd Ltd one share in Mel Ltd for every two shares held in Syd Ltd plus $1 in cash for each share held in Syd Ltd. Shares in Mel Ltd have a fair value of $1.80 per share. Carrying amountFair value$ 40000$ 67 000MachineryFixtures & fittingsVehicles60 00068 00035 00035 000Current assets1000012000Current liabilities(16000)(18000)Total net assets$129 000Share capital (80 000 shares at $1.00 per share)General reserveRetained earnings$ 800002000029 000Total equity$129 000

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Answered: On 1 July 2021, Mel Ltd took control of…

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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On 1 July 2021, Mel Ltd took control of the assets and liabilities of Syd Ltd. At this date the statement of financial position of Syd Ltd was as follows:

Required

Prepare the journal entries in the records of Mel Ltd at 1 July 2021 in each of the following situations, assuming the costs of issuing the shares by Mel Ltd cost $1600.

Mel Ltd issued 80 000 shares having a fair value of $2.40 per share in exchange for the net assets of Syd Ltd
Mel Ltd issued 80 000 shares having a fair value of $2.00 per share in exchange for the net assets of Syd Ltd.
Mel Ltd acquired the shares of Syd Ltd. The agreement was that Mel Ltd would pay the shareholders of Syd Ltd one share in Mel Ltd for every two shares held in Syd Ltd plus $1 in cash for each share held in Syd Ltd. Shares in Mel Ltd have a fair value of $1.80 per share.

Carrying amount
Fair value
$ 40000
$ 67 000
Machinery
Fixtures & fittings
Vehicles
60 000
68 000
35 000
35 000
Current assets
10000
12000
Current liabilities
(16000)
(18000)
Total net assets
$129 000
Share capital (80 000 shares at $1.00 per share)
General reserve
Retained earnings
$ 80000
20000
29 000
Total equity
$129 000

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