Sabinni Pty Ltd (12 marks) Shelby Company Ltd is a seafood business with headquarters in Birmingham, England. Shelby Company Pty Ltd products include many varieties of seafood but one item lacking in its product range is Scottish Lobster. On 15 October 2020, the board of Shelby Company Ltd decided to investigate a takeover of an Italian company, Sabinni Pty Ltd, whose major product is the packaging of Scottish Lobster. Strategically, Sabinni Pty Ltd would be a good fit with Shelby Company Ltd as Shelby Company Ltd owns two other processing factories in Wolverhampton, one of which is under-utilized. If Sabinni Pty Ltd were acquired, then Shelby Company Ltd would liquidate the company and transfer all the processing work to the under-utilized factory. An agreement was reached on 15 October 2020. The financial statements of Sabinni Pty Ltd at 15 October 2020 showed the following information: Sabinni Pty Ltd Assets Current assets Cash Accounts receivable Dividend receivable Inventory 6 000 64 800 25 000 27 200 123 000 65 000 Non-current assets Freehold land Machinery Plant and equipment Less: Accumulated depreciation 55 000 167 000 (40 000) 247 000 370 000 Total assets Liabilities Current liabilities Accounts payable Loans payable 79 300 Non-current liabilities Loan payable Total liabilities Net assets 65 700 145 000 10 000 155 000 215 000 Equity Share capital - 80 000 A1 Ordinary shares Share capital - 80 000 A2 Ordinary shares Retained earnings Total equity 80 000 80 000 55 000 215 000 All the assets and liabilities of Sabinni Pty Ltd were recorded at amounts equal to fair value except for: Fair Value ($) Plant and equipment 140 000 Freehold land 135 000 Inventory 28 000 Sabinni Pty Ltd also had a brand 'Charles Sabinni' that was not recorded by the company because it had been internally generated. It is valued at $50 000. Sabinni Pty Ltd had not recorded both the interest accrued on the loans amounting to $12 800 and annual leave entitlements of $23 000. Shelby Company Ltd decided to acquire all the assets of Sabinni Pty Ltd except for cash and dividend receivable. In exchange for these assets, Shelby Company Ltd agreed to provide: Three shares in Shelby Company Ltdfor every four A1 ordinary shares held in Sabinni Pty Ltd. The fair value of each Shelby Company Ltd share was agreed to be $4.20; A patent for oceanography mapping hardware and software to the owners of the A2 ordinary shares held in Sabinni Pty Ltd. (The patent is recognised by Shelby Company Ltd at a carrying amount of $40 000. Its fair value is 88 000.); Cash of $11 000; and Sufficient additional cash to enable Sabinni Pty Ltd to pay off its liabilities. Note that dividend receivable was received on 18 October 2020 itself. The business combination occurred on 15 October 2020. Legal and accounting costs incurred by Shelby Company Ltd in undertaking this business combination amounted to $20 000. Costs to issue the shares to the A1 ordinary shareholders of Sabinni Pty Ltd were $1 500. Required: Show all workings. Narrations are not required. (a) Prepare the acquisition analysis of Sabinni Pty Ltd as at 15 October 2020. (6 marks) (b) Prepare the general journal entries in the records of Shelby Company Ltd at 15 October 2020 to record this business combination as per AASB 3/IFRS 3, based on the information aboun Sabinni Pty Ltd (12 marks) Shelby Company Ltd is a seafood business with headquarters in Birmingham, England. Shelby Company Pty Ltd products include many varieties of seafood but one item lacking in its product range is Scottish Lobster. On 15 October 2020, the board of Shelby Company Ltd decided to investigate a takeover of an Italian company, Sabinni Pty Ltd, whose major product is the packaging of Scottish Lobster. Strategically, Sabinni Pty Ltd would be a good fit with Shelby Company Ltd as Shelby Company Ltd owns two other processing factories in Wolverhampton, one of which is under-utilized. If Sabinni Pty Ltd were acquired, then Shelby Company Ltd would liquidate the company and transfer all the processing work to the under-utilized factory. An agreement was reached on 15 October 2020. The financial statements of Sabinni Pty Ltd at 15 October 2020 showed the following information: Sabinni Pty Ltd Assets Current assets Cash Accounts receivable Dividend receivable Inventory 6 000 64 800 25 000 27 200 123 000 65 000 Non-current assets Freehold land Machinery Plant and equipment Less: Accumulated depreciation 55 000 167 000 (40 000) 247 000 370 000 Total assets Liabilities Current liabilities Accounts payable Loans payable 79 300 Non-current liabilities Loan payable Total liabilities Net assets 65 700 145 000 10 000 155 000 215 000 Equity Share capital - 80 000 A1 Ordinary shares Share capital - 80 000 A2 Ordinary shares Retained earnings Total equity 80 000 80 000 55 000 215 000 All the assets and liabilities of Sabinni Pty Ltd were recorded at amounts equal to fair value except for: Fair Value ($) Plant and equipment 140 000 Freehold land 135 000 Inventory 28 000 Sabinni Pty Ltd also had a brand 'Charles Sabinni' that was not recorded by the company because it had been internally generated. It is valued at $50 000. Sabinni Pty Ltd had not recorded both the interest accrued on the loans amounting to $12 800 and annual leave entitlements of $23 000. Shelby Company Ltd decided to acquire all the assets of Sabinni Pty Ltd except for cash and dividend receivable. In exchange for these assets, Shelby Company Ltd agreed to provide: Three shares in Shelby Company Ltdfor every four A1 ordinary shares held in Sabinni Pty Ltd. The fair value of each Shelby Company Ltd share was agreed to be $4.20; A patent for oceanography mapping hardware and software to the owners of the A2 ordinary shares held in Sabinni Pty Ltd. (The patent is recognised by Shelby Company Ltd at a carrying amount of $40 000. Its fair value is 88 000.); Cash of $11 000; and Sufficient additional cash to enable Sabinni Pty Ltd to pay off its liabilities. Note that dividend receivable was received on 18 October 2020 itself. The business combination occurred on 15 October 2020. Legal and accounting costs incurred by Shelby Company Ltd in undertaking this business combination amounted to $20 000. Costs to issue the shares to the A1 ordinary shareholders of Sabinni Pty Ltd were $1 500. Required: Show all workings. Narrations are not required. (a) Prepare the acquisition analysis of Sabinni Pty Ltd as at 15 October 2020. (6 marks) (b) Prepare the general journal entries in the records of Shelby Company Ltd at 15 October 2020 to record this business combination as per AASB 3/IFRS 3, based on the information aboun