Question
Pink Ltd acquired all theassetsand liabilities of Sharp Ltd on 1 July 2020.At this date, theassetsand liabilities of Sharp Ltd consisted of the following: Carrying
Pink Ltd acquired all theassetsand liabilities of Sharp Ltd on 1 July 2020.At this date, theassetsand liabilities of Sharp Ltd consisted of the following:
Carrying Amount
Fair Value
Assets
Cash
400,000
400,000
Accounts receivable
380,000
420,000
Land
400,000
410,000
Vehicle
130,000
90,000
Accumulateddepreciation-Vehicle
(30,000)
Liabilities
Accounts payable
350,000
350,000
Loans
400,000
400,000
Equity
ShareCapital- 100 000 shares
500,000
Reserves
30,000
In exchange for theseassetsand liabilities, Pink Ltd agreed to
Issue 2 Pink Ltd shares for every Sharp Ltd Share - Pink Ltd shares were considered to have a fair value of $2 per share; costs of issue were $700
Transfer a piece of Land to the former shareholders of Sharp Ltd - the Land was carried in the records of Pink Ltd at $300,000 but was considered to have a fair value of $400,000.
Pay $2 per share in cash to each of the former shareholders of Sharp Ltd.
Pink Ltd incurred $2,200 in costs associated with the acquisition of these netassets
A.As per the Acquisition Analysis prepared on 01/07/2020, the Goodwill or gain on bargain purchase would be:
B.The Journal entry torecordvalue difference in land will be : (Ignore Income tax effect)
C.The Journal entry torecordcosts associated with the acquisition of these netassets:
D.The Journal entry torecordcosts of share issue :
E.The Journal entry torecordGoodwill or gain on bargain purchase:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
A Goodwill or Gain on Bargain Purchase Calculation 1 Calculation of Fair Value of Pink Ltd shares issued Pink Ltd agreed to issue 2 shares for every S...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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