On 1 July 2018, Martha Ltd and Jones Ltd sign an agreement whereby the operations of Jones Ltd are to be taken over by Martha Ltd. Jones Ltd will liquidate after the transfer is complete. The statements of financial position of the two companies on that day were as shown below.

Martha LtdJones Ltd

Cash5000020000

Accounts receivable 7500056000

Inventories 4600029000

Land650000

Plant and equipment 180000167000

Accumulated Dep - plant and equip (60000)(40000)

Patents 100000

Shares in Cape Ltd 026000

Debentures in Brett Ltd (nominal value) 100000

376000258000

Accounts Payable 6200031000

Mortgage loan 7500021500

10% debentures (face value) 10000030000

Contributed equity:

Ordinary shares of $1 fully paid 1000000

A class shares of $2 fully paid 040000

B class shares of $1 fully paid 60000

Retained earnings 3900075500

376000258000

Martha Ltd is to acquire all assets of Jones Ltd (except for cash). The assets of Jones Ltd are recorded at their fair values except for:

Carrying amountFair value

Inventories 2900039200

Plant and equipment 127000140000

Shares in Cape Ltd 2600025500

In exchange, the A class shareholders of Jones Ltd are to receive one 7% debenture in Martha Ltd, redeemable on 1 July 2019, for every share held in Jones Ltd. The fair value of each debenture is $3.50. Martha Ltd will also provide one of its patents to be held jointly by the A class shareholders of Jones Ltd and for which they will receive future royalties. The patent is carried at $4000 in the records of Martha Ltd, but is considered to have a fair value of $5000.

The B class shareholders of Jones Ltd are to receive two shares in Martha Ltd for every three shares held in Jones Ltd. The fair value of each Martha Ltd share is $2.70. Costs to issue these shares amount to $900. Additionally, Martha Ltd is to provide Jones Ltd with sufficient cash, additional to that already held, to enable Jones Ltd to pay its liabilities. The outstanding debentures are to be redeemed at a 10% premium. Annual leave entitlements of $16200 outstanding at 1 July 2018 and expected liquidation costs of $5000 have not been recognized by Jones Ltd.Costs incurred in arranging the business combination amounted to $1600.

Required:

Prepare the journal entries in the records of Martha Ltd to record the acquisition of Jones Ltd.

On 1 July 2018, Martha Ltd and Jones Ltd sign an agreement whereby the operations of Jones Ltd are to be taken over by Martha Ltd. Jones Ltd will liquidate after the transfer is complete. The statements of financial position of the two companies on that day were as shown below. Martha Ltd Jones Ltd Cash 50000 20000 Accounts receivable 75000 56000 Inventories 46000 29000 Land 65000 0 Plant and equipment 180000 167000 Accumulated Dep - plant and equip (60000) (40000) Patents 10000 0 Shares in Cape Ltd 0 26000 Debentures in Brett Ltd (nominal value) 10000 0 376000 258000 Accounts Payable 62000 31000 Mortgage loan 75000 21500 10% debentures (face value) 100000 30000 Ordinary shares of $1 fully paid 100000 0 A class shares of $2 fully paid 0 40000 Contributed equity: B class shares of $1 fully paid Retained earnings 60000 39000 75500 376000 258000 Martha Ltd is to acquire all assets of Jones Ltd (except for cash). The assets of Jones Ltd are recorded at their fair values except for: Carrying amount Fair value Inventories 29000 39200 Plant and equipment 127000 140000 Shares in Cape Ltd 26000 25500 In exchange, the A class shareholders of Jones Ltd are to receive one 7% debenture in Martha Ltd, redeemable on 1 July 2019, for every share held in Jones Ltd. The fair value of each debenture is $3.50. Martha Ltd will also provide one of its patents to be held jointly by the A class shareholders of Jones Ltd and for which they will receive future royalties. The patent is carried at $4000 in the records of Martha Ltd, but is considered to have a fair value of $5000. The B class shareholders of Jones Ltd are to receive two shares in Martha Ltd for every three shares held in Jones Ltd. The fair value of each Martha Ltd share is $2.70. Costs to issue these shares amount to $900. Additionally, Martha Ltd is to provide Jones Ltd with sufficient cash, additional to that already held, to enable Jones Ltd to pay its liabilities. The outstanding debentures are to be redeemed at a 10% premium. Annual leave entitlements of $16200 outstanding at 1 July 2018 and expected liquidation costs of $5000 have not been recognized by Jones Ltd. Costs incurred in arranging the business combination amounted to $1600. Required: Prepare the journal entries in the records of Martha Ltd to record the acquisition of Jones Ltd