QUESTION 4: Total of 18 marks This question consists of 2 parts (Parts A and B). All parts must be attempted. Alice Ltd acquired all the assets, except cash, and assumed all the liabilities of Medicure Ltd on 1 July 2020. Alice Ltd agreed to provide the following consideration on 1 July 2020: (1) Cash payment of $100,000, half of which is paid on the acquisition date, the remaining half of which is to be paid one year after the acquisition on 1 July 2021. (2) Issue 20,000 shares in Alice Ltd to the owners of Medicure Ltd. Alice Ltd's shares were trading at $19.87 per share on 1 July 2020. The cost of the share issue was $7,948. (3) In the event that Alice Ltd's share price falls below $15.00 per share by 1 August 2020, Alice Ltd would provide additional cash payment of $4.87 per share for the 20,000 issued shares. There is a 30% chance for the share price of Alice Ltd to fall below $15.00 by 1 August 2020. (4) Alice also provides an existing patent to Medicure Ltd. The patent is not recognised in Alice Ltd's balance sheet but is estimated to have a fair value of $27,800 on the acquisition date. Alice Ltd incurred $31,740 accounting and legal fees in relation to its acquisition of Medicure Ltd. Alice Ltd's marginal cost of capital is 12% per annum. The corporate tax rate is 30%. On 1 July 2020, the financial position of Medicure Ltd was as follows: On 1 July 2020, the financial position of Medicure Ltd was as follows: Carrying amount Fair value Assets Cash $15,000 Accounts receivable 195,000 105,000 Land 135,000 210,000 Equipment (net of depreciation) 60,000 45,000 Buildings (net of depreciation) 135,000 240,000 Vehicles (net of depreciation) 120,000 127,500 Other Investments 90,000 60,000 Other Non-Current Assets 300,000 270,000 Total assets $1,050,000 Equity Share capital - 10,000 shares 375,000 Retained earnings 180,000 Total equity 555,000 Liabilities Accounts payable 75,000 75,000 Loans 60,000 60,000 Debentures 360,000 360,000 Total liabilities 495,000 Total equity and liabilities $1,050,000 Through the due diligence process, it is discovered that Medicure Ltd has provided warranties to customers which, if claimed, would cost Medicure Ltd $100,000. Based on historical data, it was estimated that there was a 50% chance that the warranties would be claimed. In addition, Medicure Ltd had an internally developed trademark which is not recorded in its balance sheet but has a fair value of $16,500. Required: Part (A): Complete the acquisition analysis in relation to this business combination and calculate the goodwill or gain on bargain purchase (7 marks). Part (B): Prepare the journal entries in the records of Alice Ltd in relation to its acquisition of Medicure Ltd on 1 July 2020 in accordance with AASB 3 (11 marks). Show all calculations. Formatting requirements: In all journal entries, you must specify whether the entry is a debit or credit entry by including "Dr" or "Cr" before the account name. Credit entries must also be indented. Journal entries which do not follow these requirements will be awarded a mark of zero. Below are examples of correctly formatted journal entries: Dr Cash 1000 Cr Cash 1000 OR 1000 Dr Cash Cr Cash - 1000 11 7 points Question 4 Part (A) Complete the acquisition analysis in relation to this business combination and calculate the goodwill or gain on bargain purchase. 12 - 11 points Question 4 Part (B) Prepare the journal entries in the records of Alice Ltd in relation to its acquisition of Medicure Ltd on 1 July 2020 in accordance with AASB 3. IHU