Question
When doing the journal entries for a business acquisition on the books of the parent (Inabox), do I just record the investment? or do I
When doing the journal entries for a business acquisition on the books of the parent (Inabox), do I just record the investment? or do I also record the loans created to acquire the subsidiary (Hostworks)?
Given:
On 15 February 2017, Inabox acquired 100% of the shares of Hostworks Group Pty Ltd for a total consideration of $7,616,000. This acquisition resulted to a goodwill of 4,408,000 which Inabox treats as the value of expected synergies and growth arising from the acquisition.
In order to cater for this acquisition, Inabox had to issue 3,636,364 ordinary shares, they also agreed to a 2,000,000.00 vendor loan facility with Hostworks payable in 6 months from acquisition, and an additional loan facility of 3,000,000 was used to further fund the acquisition of Hostworks payable in 3 years from the date it was drawn which is 15 February 2017.
Required:
Prepare the journal entries in the books of the parent, Inabox Group Limited, for the acquisition of Hostworks.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started