25.6 Accounting for business combination by acquirer** LO6 Police Ltd and Box Ltd are small family-owned companies engaged in vegetable growing and distribution. The Noble family owns the shares in Box Ltd and the Tyler family owns the shares in Police Ltd. The head of the Noble family wishes to retire but his two sons are not interested in carrying on the family business. Accordingly, on 1 July 2021, Police Ltd is to take over the operations of Box Ltd, which will then liquidate. Police Ltd is asset-rich but has limited overdraft facilities so the following arrangement has been made Police Ltd is to acquire all of the assets, except cash, delivery trucks and motor vehicles, of Box Ltd and will assume all of the liabilities except accounts payable. In return, Police Ltd is to give the shareholders of Box Ltd a block of vacant land, two delivery vehicles and sufficient additional cash to enable the company to pay off the accounts payable and the liquidation costs of $1500. On the liquidation of Box Ltd, Mr Noble is to receive the land and the motor vehicles and his two sons are to receive the delivery trucks. The land and vehicles had the following market values at 30 June 2021. Carrying Fair value mount Freehold land $50 000 $120 000 Delivery trucks 30000 28 000 The statements of financial position of the two companies as at 30 June 2018 were as follows. Police Ltd Ltd Cash Accounts receivable Freehold land Buildings (net) Cultivation equipment (net) Irrigation equipment Delivery trucks Motor vehicles $3500 25 000 250 000 25 000 65 000 16 000 45 000 25 000 454 500 S 26 000 150 000 35 000 70 000 100 000 $2000 15 000 100 000 30 000 46 000 22 000 36 000 32 000 283 000 S 23500 80 000 35 000 52 500 Accounts payable Loan Bank of Gallifrey Loan Williams Bros Loan Smith Corp. Share capital 100 000 shares -60 000 shares 60 000 28 500 45 000 454 500 Reserves Retained earnings 32 000 $283 000 All the assets of Box Ltd are recorded at fair value, with the exception of: Fair value Freehold land Buildings Cultivation equipment Motor vehicle S 120000 40 000 40 000 34 000 Required Prepare the acquisition analysis and the journal entries to record the acquisition of Box Ltd's operations in the records of Police Ltd 1. 2. Prepare the statement of financial position of Police Ltd after the business combination