You are the Financial Accountant of Avalo Ltd$,$ a furniture distributor which has been in business for many years. Avalo Ltd$\text{'}$s directors decide to expand the

K'usiness to include manufacturing activities. On $1$ March $2024,$ Avalo Ltd acquired all of the assets and liabilities from Bosh Furniture Ltd$.$

Tihe following net assets are extracted from the Statement of Financial Position of Bosh Furniture Ltd as at $1$ March $2024$: In exchange for all the above assets and liabilities, Avalo Ltd agrees to:

issue $205,000$ new shares in Avalo Ltd to Bosh Furniture Ltd$.$ On $1$ March $2024,$ Avalo Ltd$\text{'}$s shares are trading on the Australian Securities Exchange

at $$2\mathrm{.}90$ per share.

pay a total cash consideration of $$500,000,$ where $$300,000$ will be paid on the date of acquisition, and the balance on $1$ March $2025.$ The

incremental borrowing rate for Avalo Ltd is $11\%.$

transfer one of its vacant lands in regional Victoria to Bosh Furniture Ltd$.$ On $1$ March $2024,$ the land has a carrying amount and fair value of $$90,000$

and $$390,000$ respectively.

Incidental to the acquisition of Bosh Furniture Ltd$,$ Avalo Ltd incurred acquisition$-$related costs of $$8,500,$ and costs of issuing the shares in Avalo Ltd of

$$3,700.$

Required:You are the Financial Accountant of Avalo Ltd$,$ a furniture distributor which has been in business for many years. Avalo Ltd$\text{'}$s directors decide to expand the business to include manufacturing activities. On $1$ March $2024,$ Avalo Ltd acquired all of the assets and liabilities from Bosh Furniture Ltd$.$

The following net assets are extracted from the Statement of Financial Position of Bosh Furniture Ltd as at $1$ March $2024$:

Carrying Amount

Fair Value

$

$

Assets acquired

Land and buildings

$450,000$

$580,000$

Plant and equipment

$120,000$

$150,000$

Motor vehicles

$175,000$

$190,000$

Patent

$50,000$

$250,000$

Accounts receivable

$112,000$

$112,000$

Inventory

$428,000$

$428,000$

Liabilities assumed

Bank loan

$(300,000)$

$(300,000)$

Accounts payable

$(125,000)$

$(125,000)$

$910,000$

$1,285,000$

In exchange for all the above assets and liabilities, Avalo Ltd agrees to:

issue $205,000$ new shares in Avalo Ltd to Bosh Furniture Ltd$.$ On $1$ March $2024,$ Avalo Ltd$$s shares are trading on the Australian Securities Exchange at $$2\mathrm{.}90$ per share.

pay a total cash consideration of $$500,000,$ where $$300,000$ will be paid on the date of acquisition, and the balance on $1$ March $2025.$ The incremental borrowing rate for Avalo Ltd is $11\%.$

transfer one of its vacant lands in regional Victoria to Bosh Furniture Ltd$.$ On $1$ March $2024,$ the land has a carrying amount and fair value of $$90,000$ and $$390,000$ respectively.

Incidental to the acquisition of Bosh Furniture Ltd$,$ Avalo Ltd incurred acquisition$-$related costs of $$8,500,$ and costs of issuing the shares in Avalo Ltd of $$3,700.$

Required:As the accountant of Avalo Ltd$,$ your immediate tasks are to:

$1.$ evaluate why the acquisition of Bosh Furniture Ltd constitute a business combination by making reference to AASB$3.$

$2.$ complete an acquisition analysis in relation to the business combination.

$3.$ prepare the journal entries necessary for the business combination, in the records of the acquirer on $1$ March $2024.$