Financial and Corporate Accounting Assignment Question
Almonds Ltd has been negotiating with Raisons Ltd to buy its wholefood section. The purchase takes place on 1st July 2014. The wholefood section is considered a Cash Generating Unit and the purchased Assets and Liabilities, at their carrying amounts and at the fair values estimated by Almonds Ltd is shown below.
|
Item
|
Cost $
|
Accumulated depreciation amortization $
|
Carrying amount $
|
Fair value $
|
|
Accounts receivable
|
120,000
|
|
120,000
|
118,000
|
|
Land and buildings
|
500,000
|
250,000
|
250,000
|
300,000
|
|
Plant & Equipment
|
470,000
|
370,000
|
100,000
|
80,000
|
|
Patent
|
50,000
|
|
50,000
|
65,000
|
|
Accounts payable
|
110,000
|
|
110,000
|
110,000
|
Included in the purchases by Almonds Ltd was an identifiable intangible asset of a Trademark developed over the years by Raisons Ltd. The Trademark has a fair value of $150,000.
The purchase consideration for the business consisted of 500,000 $2 ordinary shares in Almonds Ltd, paid to $1.20 and $100,000 in cash to be paid half now and half in one year's time. The discount rate is 10% and the Present Value tables are shown on page 9.
Almond Ltd incurred legal fees of $2,500 to process the purchase of the wholefood section and $1,500 of direct costs to issue the shares.
Required:
Prepare the journal entries to record the purchase by Almonds Ltd and the total payment to Raisons Ltd.