All the assets of Steenbras Ltd are recorded at fair value, with the exception of: Freehold land $120 000 Buildings $40 000 Cultivation equipment $40 000 Motor vehicle $34 000 Required: a) Prepare the acquisition analysis and the journal entries to record the acquisition of Steenbras Ltd's operations in the records of Ling Ltd. b) Prepare the journal entries to record the liquidation of Steenbras Ltd.

FINANCIAL ACCOUNTING AND REPORTING III TUTORIAL QUESTION BUSINESS COMBINATION Ling Ltd and Steenbras Ltd are small family-owned companies engaged in vegetable growing and distribution. The Spencer family owns the shares in Steenbras Ltd and the Rokocoko family owns the shares in Ling Ltd. The head of the Spencer family wishes to retire but his two sons are not interested in carrying on the family business. Accordingly, on 1 July 2016, Ling Ltd is to take over the operations of Steenbras Ltd, which will then liquidate. Ling Ltd is asset- rich but has limited overdraft facilities so the following arrangement has been made. Ling Ltd is to acquire all of the assets, except cash, delivery trucks and motor vehicles, of Steenbras Ltd and will assume all of the liabilities except accounts payable. In return, Ling Ltd is to give the shareholders of Steenbras 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. The land and vehicles had the following values at 30 June 2016: Carrying amount Fair value Freehold land $50 000 $120 000 Delivery trucks 30 000 28 000 On the liquidation of Steenbras Ltd, Mr Spencer is to receive the land and the motor vehicles and his two sons are to receive the delivery trucks. The statements of financial position of the two companies as at 30 June 2016 were as follows: Ling Ltd Steenbras Ltd Cash $ 3.500 $ 2.000 Accounts receivable 25 000 15 000 Freehold land 250 000 100 000 Buildings (net) 25 000 30 000 Cultivation equipment (net) 65 000 46 000 Irrigation equipment 16 000 22 000 Delivery trucks 45 000 36 000 Motor vehicles 25 000 32 000 $454 500 $283 000 Accounts payable $26 000 $ 23 500 Loan Bank of NZ 150 000 80 000 Trevally Bros 35 000 35 000 Loan Loan Long Cloud 70 000 52 500 Share capital - 100 000 shares 100 000 - 60 000 shares 60 000 Reserves 28 500 Retained earnings 45 000 32 000 $454 500 $283 000