Accounting for a business combination by the acquirer    LO6 Doctor Ltd was having difficulty in raising finance for expansion while Who Ltd was interested in achieving economies by marketing a wider range of products. They entered discussions on how they could mutually achieve added benefits to both companies. They prepared the following financial positions of the companies at 30 June 2020. Doctor Ltd Who Ltd Share capital 40 000 shares $ 40 000 90 000 shares $ 90 000 Retained earnings 12 000 30 000 52 000 120 000 Liabilities: Debentures (secured by floating charge) 20 000 — Accounts payable 42 000 12 000 62 000 12 000 Total equity and liabilities $114 000 $132 000 Assets: Cash $ 12 000 $ 24 000 Accounts receivable 18 000 20 000 Inventories (at cost) 43 000 47 000 Land and buildings (at cost) 23 000 19 000 Plant and machinery (at cost) 52 000 41 000 Accumulated depreciation on plant and machinery (34 000) (19 000) Total assets $114 000 $132 000 It was agreed that it would be mutually advantageous for Doctor Ltd to specialise in manufacturing, and for marketing, purchasing and promotion to be handled by Who Ltd. Accordingly, Who Ltd sold part of its assets to Doctor Ltd on 1 July 2020, the identifiable assets acquired having the following fair values. Inventories $22 000 (cost $15 000) Land and buildings $34 000 (carrying amount $10 000) Plant and machinery $27 000 (cost $38 000, accumulated depreciation $18 000) The acquisition was satisfied by the issue of 40 000 ‘A’ ordinary shares (fully paid) in Doctor Ltd. Required 1. Assuming the assets acquired constitute a business, show the journal entries to record the above transactions in the records of Doctor Ltd:

(a) if the fair value of the ‘A’ ordinary shares of Doctor Ltd was $2 per share

(b) if the fair value of the ‘A’ ordinary shares of Doctor Ltd was $2.20 per share. 2. Show the statement of financial position of Doctor Ltd after the transactions, assuming the fair value of Doctor’s Ltd’s ‘A’ ordinary shares was $2.20 per share.