QUESTION 1 On 1 July 2021 Millar Ltd acquired the identified net assets of Cameron Ltd The statement of financial position of Cameron Ltd immediately before the takeover is as follows Carrying amount Cash $ 20000 Accounts receivable 75000 Land Buildings 675000 Plant equipment (net) 230000 Vehicles (net) 65000 $ 1065000 Accounts payable $ 80000 Loan 140 000 Share capital (400,000 ordinary shares) 400000 Retained earnings 445000 $ 1065000 Millar Ltd acquired all the assets of Cameron Ltd except for cash All assets were found to be at fair value except for accounts receivable had to be adjusted for an unrecoverable debtor of $12 500 Plant equipment had a fair value of $285,000 and had not been revalued in the books of Cameron Ltd Cameron Ltd had an internally generated patent to be acquired by Millar Ltd, not recorded in the books with a fair value of $55 000 Millar Ltd is to take over identified annual leave entitlements of $13 000 not recorded in Cameron Ltds books Consideration for the acquisition from Cameron Ltd was as follows issued 100000 shares in Millar Ltd having a fair value of $6 per share, cash $400 000 paid on 1 July 2021 Millar Ltd was to supply Cameron Ltd with sufficient additional cash, when added to the cash already held to settle the loan and accounts payable plus liquidation costs of $5 000 Required Prepare the acquisition analysis for Millar Ltd in accordance with AASB3 Business Combinations 6 marks If the fair value of the share price at acquisition was $5 per share, explain how this would impact on the acquisition entries in the records of Millar Ltd 3 marks Give examples showing how the accounting entries would differ if Millar Ltd had acquired 100 of the share capital of Cameron Ltd instead of the assets and liabilities of Cameron Ltd 2 marks Describe the treatment of the variance between Plant equipment carrying value and fair value of in Business Acquisition compared to the consolidation of a subsidiary Assuming the Plant Equipment is depreciated on a straight line basis and has a remaining effective life of your choice, prepare the journal entries including tax effect for 2023 (year 2) The tax rate is 30

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QUESTION 1 On 1 July 2021 Millar Ltd acquired the identified net assets of Cameron Ltd. The statement of financial position of Cameron Ltd immediately

QUESTION 1

On 1 July 2021 Millar Ltd acquired the identified net assets of Cameron Ltd. The statement of financial position of Cameron Ltd immediately before the takeover is as follows.

	Carrying amount
Cash	$	20000
Accounts receivable		75000
Land & Buildings		675000
Plant & equipment (net)		230000
Vehicles (net)		65000
	$	1065000
Accounts payable	$	80000
Loan		140 000
Share capital (400,000 ordinary shares)		400000
Retained earnings		445000
	$	1065000

Millar Ltd acquired all the assets of Cameron Ltd except for cash. All assets were found to be at fair value except for:

accounts receivable had to be adjusted for an unrecoverable debtor of $12 500
Plant & equipment had a fair value of $285,000 and had not been revalued in the books of Cameron Ltd.
Cameron Ltd had an internally generated patent to be acquired by Millar Ltd, not recorded in the books with a fair value of $55 000.
Millar Ltd is to take over identified annual leave entitlements of $13 000 not recorded in Cameron Ltds books.

Consideration for the acquisition from Cameron Ltd was as follows:

issued 100000 shares in Millar Ltd having a fair value of $6 per share,
cash $400 000 paid on 1 July 2021
Millar Ltd was to supply Cameron Ltd with sufficient additional cash, when added to the cash already held to settle the loan and accounts payable plus liquidation costs of $5 000.

Required

Prepare the acquisition analysis for Millar Ltd in accordance with AASB3 Business Combinations.

[6 marks]

If the fair value of the share price at acquisition was $5 per share, explain how this would impact on the acquisition entries in the records of Millar Ltd?

[3 marks]

Give examples showing how the accounting entries would differ if Millar Ltd had acquired 100% of the share capital of Cameron Ltd instead of the assets and liabilities of Cameron Ltd?

[2 marks]

Describe the treatment of the variance between Plant & equipment carrying value and fair value of in Business Acquisition compared to the consolidation of a subsidiary. Assuming the Plant & Equipment is depreciated on a straight-line basis and has a remaining effective life of your choice, prepare the journal entries including tax effect for 2023 (year 2). The tax rate is 30%.