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• Application & Analysis Exercise

Blink Ltd is seeking to expand its share of the mens products market and has negotiated to acquire the operations of Weeping Ltd

At 1 July 2023, the trial balances of the two companies were as follows.

	Blink Ltd $	Weeping Ltd $
Cash	145000	5200
Accounts receivable	34000	21300
Inventories	56000	30000
Shares in listed companies	16000	22000
Land and buildings (net)	70000	40000
Plant and equipment (net)	130000	105000
Goodwill (net)	6000	5000
	457000	228500
Accounts payable	65000	40000
Bank overdraft	0	0
Debentures	50000	0
Mortgage loan	100000	30000
Contributed equity:
Ordinary shares of $1, fully paid	200000	150000
Other reserves	15000	6500
Retained earnings (30/6/23)	27000	2000
	457 000	228 500

Blink Ltd is to acquire all assets (except Cash and Shares in listed companies) of Weeping Ltd. Acquisition-related costs are expected to be $7 600.

The net assets of Weeping Ltd are recorded at fair value except for the following.

	Carrying amount $	Fair value $
Inventories	30000	26 000
Land and Buildings	40000	80 000
Shares in Listed Companies	22000	18000
Accounts Payable	(40000)	(49 100)
Accrued Leave	0	(29 700)

In exchange, the shareholders of Weeping Ltd are to receive, for every three Weeping Ltd shares held, one Blink Ltd share worth $2.50 each. Costs to issue these shares are $950. Additionally, Blink Ltd will transfer to Weeping Ltd its Shares in Listed Companies asset, which has a fair value of $15000.

Blink Ltd will also give Weeping Ltd sufficient additional cash to enable Weeping Ltd to pay all its creditors and liquidation costs of $8 700.

Required:

Prepare the acquisition analysis and journal entries to record the acquisition of Weeping Ltd in the records of Blink Ltd.

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