Question
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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ACCA Advanced Audit And Assurance
Authors: Nick Blackwell, Annabel Lefton, Emile Woolf International
1st Edition
