Leo Ltd acquired all the assets and assumed all the liabilities of George Ltd on 1 July 2021. In exchange, Leo Ltd agreed to issue 6 Leo Ltd shares for every George Ltd share held and pay cash of $15.6 per share to the former shareholders of George Ltd for each share held in George Ltd. Leo Ltd and George Ltd shares were assessed to have a fair value of $9.1 per share and $6 per share, respectively. Costs of share issue were $800.

On 1 July 2021, the financial position of George Ltd was as follows:

Additional information:

On 30 June 2021, George Ltd had reported a contingent liability relating to a guarantee given by that company to another entity. George Ltd did not record the guarantee as a liability because of the difficulty of measuring the liability. The fair value of this contingent liability was assessed as $72,000.

The assets of George Ltd did not include a patent that was valued by Leo Ltd at $20,000.

Leo Ltd incurred $15 000 in costs in relation to accounting and legal fees in relation to its acquisition of George Ltd.

Required Prepare the journal entries in the records of Leo Ltd in relation to its acquisition of George Ltd on 1 July 2021.

Carrying amount Fair value Assets 260,000 1,040,000 2,080,000 Cash Accounts receivable Plant Accumulated depreciation plant Fixtures & fittings Accumulated depreciation -fixtures & fittings Land Vehicles Accumulated depreciation -vehicles 1,105,000 260,000 1,040,000 2,730,000 (780,000) 1,170,000 (130,000) 1,430,000 1,040,000 (260,000) 6,500,000 1,950,000 793,000 Total assets Liabilities Accounts payable Loans 130,000 520,000 650,000 130,000 520,000 Total liabilities Equity Share capital - 100 000 shares Retained earnings Total equity Total liabilities and equity 3.250,000 2,600,000 5,850,000 6,500,000