• Application & Analysis Exercise 25.12 (amended)

The financial statements of Sicily Ltd at 1 August 2022 contained the following information.

Assets	$	Equity	$
Vehicles	90000	Share capital: 150000 shares	144000
Accumulated depreciation	(13200)	Retained earnings	76800
Delivery trucks	105000	Total equity	220800
Accumulated depreciation	(18600)	Liabilities
Machinery	59400	Loans	192000
Accumulated depreciation	(9000)	Provisions	84000
Buildings	144000	Payables	126 000
Accumulated depreciation	(12000)	Accounts payable	56400
Land	240000	Total liabilities	458400
Cash	6000
Accounts receivable	36000
Inventories	51600
Total assets	679200	Total equity and liabilities	679200

An agreement has been made that Al Ltd will take over Sicily Ltd.

Al Ltd will acquire all the assets of Sicily Ltd except for the cash and the motor vehicles.

In exchange, Al Ltd will give the shareholders of Sicily Ltd a block of land valued at $288 000 and a motor vehicle valued at $61 200. These assets are currently held by Al Ltd with land carried at cost of $120 000 while the motor vehicle is carried at $60 000 (cost of $63 000, accumulated depreciation $3 000).

Al Ltd will also provide sufficient additional cash to enable Sicily Ltd to pay off the accounts payable and the liquidation expenses of $3 600.

Al Ltd incurred legal and valuation costs of $6 000 in undertaking the business combination.

The assets and liabilities of Sicily Ltd are recorded at amounts equal to fair value except for the following:

	Fair Value $
Land	300000
Buildings	168000
Machinery	60000
Delivery trucks	90000
Inventories	60000

Al Ltd also recognised the brand Sicily that was not recognised in the records of Sicily Ltd as it was an internally developed brand.

It was calculated that this brand had a fair value of $78 000.

Required:

Prepare the journal entries in Al Ltd to record the acquisition of the assets and liabilities of Sicily Ltd.