60.1K

Verified Solution

Link Copied!

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.

Answer & Explanation Solved by verified expert

See Answer