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Morrison Ltd. acquired all the issued shares (cum. dividend) of Andrews Ltd. on 1 July 2020 for $150 000. At this date the equity of

Morrison Ltd. acquired all the issued shares (cum. dividend) of Andrews Ltd. on 1 July 2020 for $150 000. At this date the equity of Andrews Ltd. was as follows:

Share Capital

$54,000

Retained Earnings

$36,000

General reserve

$18,000

As at 1 July 2020, Andrews Ltd. had a dividend payable liability of $30 000. All the identifiable assets and liabilities of Andrews Ltd. were recorded at amounts equal to their fair values at acquisition date except for:

Carrying Amount

Fair Value

Inventory

$14,000

$16,000

Machinery (cost $100 000)

$92,500

$94,000

The tax rate is 30%.

Part A

Prepare Acquisition analysis as at 1 July 2020 (4 Marks)

Morrison Ltd. acquired all the issued shares (cum. dividend) of Andrews Ltd. on 1 July 2020 for $150 000. At this date the equity of Andrews Ltd. was as follows:

Share Capital

$54,000

Retained Earnings

$36,000

General reserve

$18,000

As at 1 July 2020, Andrews Ltd. had a dividend payable liability of $30 000. All the identifiable assets and liabilities of Andrews Ltd. were recorded at amounts equal to their fair values at acquisition date except for:

Carrying Amount

Fair Value

Inventory

$14,000

$16,000

Machinery (cost $100 000)

$92,500

$94,000

The tax rate is 30%.

Part B

Prepare the pre-acquisition entries as at 1 July 2020 (4 Marks)

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