On 1 July 2019, ABC Ltd took control of the assets and liabilities of PQR Ltd. At this date the statement of financial position of PQR Ltd was as follows:Carrying AmountFair ValueMachinery$40 000$57 000Fixtures & fittings60 00078 000Vehicles35 00045 000Current assets10 00022 000Current liabilities(16 000)(19 000)Total net assets$129 000Share capital (80 000 shares at $1.00 per share)80 000General reserve20 000Retained earnings29 000Total equity$129 000REQUIRED:Prepare the acquisition analysis in the records of ABC Ltd at 1 July 2019 in the following situations, assuming the costs of issuing the shares by ABC Ltd cost $2600:a. ABC Ltd issued 80 000 shares having a fair value of $2.50 per share in exchange for the net assets of PQR Ltdb. ABC Ltd acquired the shares of PQR Ltd. The agreement was that ABC Ltd would pay the shareholders of PQR Ltd one share in ABC Ltd for every two shares held in PQR Ltd plus $1 in cash for each share held in PQR Ltd. Shares in ABC Ltd have a fair value of $2.10 per share.
On 1 July 2019, ABC Ltd took control of the assets and liabilities of PQR Ltd. At this date the
Carrying AmountFair Value
Machinery$40 000$57 000
Fixtures & fittings60 00078 000
Vehicles35 00045 000
Current assets10 00022 000
Current liabilities(16 000)(19 000)
Total net assets$129 000
Share capital (80 000 shares at $1.00 per share)80 000
General reserve20 000
Total equity$129 000
REQUIRED:
Prepare the acquisition analysis in the records of ABC Ltd at 1 July 2019 in the following situations, assuming the costs of issuing the shares by ABC Ltd cost $2600:
a. ABC Ltd issued 80 000 shares having a fair value of $2.50 per share in exchange for the net assets of PQR Ltd
b. ABC Ltd acquired the shares of PQR Ltd. The agreement was that ABC Ltd would pay the shareholders of PQR Ltd one share in ABC Ltd for every two shares held in PQR Ltd plus $1 in cash for each share held in PQR Ltd. Shares in ABC Ltd have a fair value of $2.10 per share.
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