Question
On 1 January 2017 Peter Limited purchased a parcel of assets and liabilities directly from Alexander Ltd, which constitutes a business in accordance with AASB
On 1 January 2017 Peter Limited purchased a parcel of assets and liabilities directly from Alexander Ltd, which constitutes a business in accordance with AASB 3 Business Combinations. The cost of the acquisition was $95,000, which was paid in cash.
The financial information of Alexander Limited as at 1 January 2017 is listed below;
The trademark relates to an internally generated intangible asset that cannot be recognised in the books of Alexander Ltd and the contingent liability refers to a claim by a former employee relating to unfair dismissal case which was disclosed in the notes to the financial statements. The court hearing is due to be held during 2017.
Required:
(a) Prepare the journal entries to record the acquisition by Peter Limited as at 1 January 2017. Show all workings. Journal narrations are not required.
(b) Explain WITHOUT journals (and no calculations required) the different accounting treatment if the acquisition did not constitute a business in accordance with AASB 3 Business Combinations.
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