On 30 June 20X7, Edison Ltd acquired all the assets and liabilities of Oliver Ltd, with Oliver Ltd going into liquidation. In exchange for these assets and liabilities, Edison Ltd issued 60,000 shares, and the fair value of each share at the acquisition date is $4. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Oliver Ltd amounted to $1,500. The assets and liabilities of Oliver Ltd at 30 June 20X7 were as follows: Carrying amount Fair value Cash 12 000 12 000 Accounts receivable (Cost: $45 000, Estimated uncollectable debts: $5000) 40 000 36 000 Inventory 60 000 76 000 Plant (Cost: $200 000, Accumulated 120 000 145 000 depreciation: $80 000) Accounts payable 40 000 40 000 Additional information: Oliver Ltd had not recorded an internally developed patent. Edison Ltd valued this at $26,000. Oliver Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Edison Ltd estimated the fair value of this contingent liability to be $5,000. Required: Prepare all the necessary journal entries in the records of Edison Ltd at 30 June 20X7. Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations are NOT required. 3) The template should provide enough space. However, if you find the space is insufficient in the template or encounter a table formatting issue, write your journal entries below the template and ensure labelling DR or CR.
On 30 June 20X7, Edison Ltd acquired all the assets and liabilities of Oliver Ltd, with Oliver Ltd going into liquidation. In exchange for these assets and liabilities, Edison Ltd issued 60,000 shares, and the fair value of each share at the acquisition date is $4. Costs of issuing these shares amounted to $2,000. Legal costs associated with the acquisition of Oliver Ltd amounted to $1,500. The assets and liabilities of Oliver Ltd at 30 June 20X7 were as follows: Carrying amount Fair value Cash 12 000 12 000 Accounts receivable (Cost: $45 000, Estimated uncollectable debts: $5000) 40 000 36 000 Inventory 60 000 76 000 Plant (Cost: $200 000, Accumulated 120 000 145 000 depreciation: $80 000) Accounts payable 40 000 40 000 Additional information: Oliver Ltd had not recorded an internally developed patent. Edison Ltd valued this at $26,000. Oliver Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Edison Ltd estimated the fair value of this contingent liability to be $5,000. Required: Prepare all the necessary journal entries in the records of Edison Ltd at 30 June 20X7. Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations are NOT required. 3) The template should provide enough space. However, if you find the space is insufficient in the template or encounter a table formatting issue, write your journal entries below the template and ensure labelling DR or CR.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On 30 June 20X7, Edison Ltd acquired all the assets and liabilities of Oliver Ltd, with Oliver Ltd going into
liquidation. In exchange for these assets and liabilities, Edison Ltd issued 60,000 shares, and the fair value
of each share at the acquisition date is $4. Costs of issuing these shares amounted to $2,000. Legal costs
associated with the acquisition of Oliver Ltd amounted to $1,500.
The assets and liabilities of Oliver Ltd at 30 June 20X7 were as follows:
Carrying amount
Fair value
Cash
12 000
12 000
Accounts receivable (Cost: $45 000,
Estimated uncollectable debts: $5000)
40 000
36 000
Inventory
60 000
76 000
Plant (Cost: $200 000, Accumulated
120 000
145 000
depreciation: $80 000)
Accounts payable
40 000
40 000
Additional information:
Oliver Ltd had not recorded an internally developed patent. Edison Ltd valued this at $26,000.
Oliver Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Edison Ltd
estimated the fair value of this contingent liability to be $5,000.
Required:
Prepare all the necessary journal entries in the records of Edison Ltd at 30 June 20X7.
Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations
are NOT required. 3) The template should provide enough space. However, if you find the space is
insufficient in the template or encounter a table formatting issue, write your journal entries below the
template and ensure labelling DR or CR.
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