Tutorial 6 Solutions

Tutorial 6 Solutions - TUTORIAL 6 SOLUTIONS Problem 12.1...

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Page TUTORIAL 6 SOLUTIONS Problem 12.1 Accounting for a business combination by both the acquirer and the acquiree ELIZABETH LTD – FRENCH LTD A(1) Assuming the fair value of “A” ordinary shares was $2 per share Acquisition analysis Net fair value of identifiable assets and liabilities acquired = $22 000 (inventory) + $34 000 (land and buildings) + $27 000 (plant and machinery) = $83 000 Consideration transferred = 40 000 x $2.00 = $80 000 Gain on bargain purchase = $3 000 Journal entries: Inventory Dr 22 000 Land and buildings Dr 34 000 Plant and machinery Dr 27 000 Gain on bargain purchase Cr 3 000 Share capital “A” Ordinary Cr 80 000 (Assets acquired and shares issued) A(2) Assuming the fair value of “A” ordinary shares was $2.20 per share Acquisition analysis Net fair value of identifiable assets and liabilities acquired = $83 000 Consideration transferred = 40 000 x $2.20 = $88 000 Goodwill = $5 000 Journal entries : Inventory Dr 22 000 Land and buildings Dr 34 000
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Tutorial 6 Solutions - TUTORIAL 6 SOLUTIONS Problem 12.1...

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