Trump Ltd acquired all the assets and liabilities of Bush Ltdon 30 June 2020.The purchase consideration was as follows:$1,000,000 in cash paid on acquisition date• Two shares in Trump Ltd for every one share in Bush Ltd.Bush Ltd has 2,000,000 shares on issue at 30 June 2020.At 30 June 2013 Trump Ltd shares were quoted on theASX at $2.50per share.• A deferred payment of $500,000 to be paid on 30 June2014.Trump Ltd's cost of capital is 7% which representsa one period present value factor of 0.9346• Should the price of Trump Ltd shares fall below $2.50 inthe six months following the acquisition Trump Ltd isrequired to pay a cash contingent consideration. It isestimated that there is a 60% probability that the shareprice will fall to $2.45 in this period.Other informationTrump Ltd incurred legal and other costs associated withthe acquisition of $10,000- Trump Ltd incurred share issue costs of $4,000The assets and liabilities acquired from Bush Ltd are asfollows:Bush LtdCarrying amount Fair Value760 000Accounts Receivable720 0001 300 000 1 440 000InventoryProperty Plant and EquipmentAccounts Payable8 680 000 9 560 000(680 000) (680 000)Provision for Employee Benefits(170 000) (220 000)In addition Bush Ltd has contingent liabilities of $40,000 atthe acquisition date.Required:a) Prepare an acquisition analysis for Trump Ltd'sacquisition of the net assets of Bush Ltdb) Prepare the journal entries to record the acquisition inthe books of Trump Ltdc) Prepare the journal entry in the books of Trump Ltd ifTrump Ltd had purchased all the issued shares of BushLtd by issuing 5,000,000 shares in Trump Ltd at anissue price of $2.50 per share.

Acquisition of the entire business can be defined as when one company takes over the entire business…

Required: a) Prepare an acquisition analysis for Trump Ltd's acquisition of the net assets of Bush Ltd b) Prepare the journal entries to record the acquisition in the books of Trump Ltd c) Prepare the journal entry in the books of Trump Ltd if Trump Ltd had purchased all the issued shares of Bush Ltd by issuing 5,000,000 shares in Trump Ltd at an issue price of $2.50 per share.

Required: a) Prepare an acquisition analysis for Trump Ltd's acquisition of the net assets of Bush Ltd b) Prepare the journal entries to record the acquisition in the books of Trump Ltd c) Prepare the journal entry in the books of Trump Ltd if Trump Ltd had purchased all the issued shares of Bush Ltd by issuing 5,000,000 shares in Trump Ltd at an issue price of $2.50 per share.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Trump Ltd acquired all the assets and liabilities of Bush Ltd
on 30 June 2020.
The purchase consideration was as follows:
$1,000,000 in cash paid on acquisition date
• Two shares in Trump Ltd for every one share in Bush Ltd.
Bush Ltd has 2,000,000 shares on issue at 30 June 2020.
At 30 June 2013 Trump Ltd shares were quoted on the
ASX at $2.50
per share.
• A deferred payment of $500,000 to be paid on 30 June
2014.Trump Ltd's cost of capital is 7% which represents
a one period present value factor of 0.9346
• Should the price of Trump Ltd shares fall below $2.50 in
the six months following the acquisition Trump Ltd is
required to pay a cash contingent consideration. It is
estimated that there is a 60% probability that the share
price will fall to $2.45 in this period.
Other information
Trump Ltd incurred legal and other costs associated with
the acquisition of $10,000
- Trump Ltd incurred share issue costs of $4,000
The assets and liabilities acquired from Bush Ltd are as
follows:
Bush Ltd
Carrying amount Fair Value
760 000
Accounts Receivable
720 000
1 300 000 1 440 000
Inventory
Property Plant and Equipment
Accounts Payable
8 680 000 9 560 000
(680 000) (680 000)
Provision for Employee Benefits
(170 000) (220 000)
In addition Bush Ltd has contingent liabilities of $40,000 at
the acquisition date.
Required:
a) Prepare an acquisition analysis for Trump Ltd's
acquisition of the net assets of Bush Ltd
b) Prepare the journal entries to record the acquisition in
the books of Trump Ltd
c) Prepare the journal entry in the books of Trump Ltd if
Trump Ltd had purchased all the issued shares of Bush
Ltd by issuing 5,000,000 shares in Trump Ltd at an
issue price of $2.50 per share.

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