Question
Victoria Ltd purchased from Albert Ltd the following parcel of assets and liabilities representing a business. In exchange for these assets and liabilities, Victoria Ltd
Victoria Ltd purchased from Albert Ltd the following parcel of assets and liabilities representing a business. In exchange for these assets and liabilities, Victoria Ltd issued 10 000 shares, and the fair value of each share at the acquisition date is $5.50. Cost of issuing shares were $4 000. Legal costs associated with the acquisition amounted to $2 000. After the transaction, Albert Ltd continued in business otherwise unaffected.
Cost | Carrying amount | Fair value | |
Accounts receivable | 45 000 | 40 000 | 37 000 |
Machinery | 120 000 | 100 000 | 90 000 |
Accounts payable | 12 000 | 12 000 | 12 000 |
Additional information:
Victoria Ltd assumed responsibility for unrecognised contingent liability of Albert Ltd with a fair value of $50 000. The contingent liability relates to an unresolved legal claim.
Required:
Prepare all necessary journal entries to record the above acquisition.
Note 1) Use the provided journal entry template to enter your answer. 2) Workings/calculations or narrations are NOT required. 3) The template should provide enough space. However, if you find the space is insufficient in the template or encounter a table formatting issue, write your journal entries below the template, and ensure labelling DR or CR.
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