Lawyers estimate that there is a 10% chance of losing the case. Susan Ltd incurred $8,000 in costs in relation to accounting and legal fees in relation to its acquisition of Adam Ltd. Required (a) Prepare acquisition analysis in relation to Susan Ltd’s acquisition of Jolie Ltd. (b) Prepare the journal entries in the records of Susan Ltd on 1 July 2022 to account for its acquisition of Adam Ltd. Narrations are NOT required.
On 1 July 2022, Susan Ltd took control of the assets and liabilities of Adam Ltd. At this date the
| Carrying amount | Fair value | |
| Machinery | $60,000 | $87,000 |
| Fixtures & Fittings | 80,000 | 88,000 |
| Vehicles | 55,000 | 55,000 |
| Current Assets | 30,000 | 32,000 |
| Current Liabilities | (36,000) | (38,000) |
| Total Net assets | 189,000 | |
| Share capital (100 000 shares) | 100,000 | |
| General reserve | 40,000 | |
| 49,000 | ||
| Total Equity | 189,000 |
Susan Ltd agreed to:
(i) pay the shareholders of Adam Ltd one share in Susan Ltd for every two shares held in Adam Ltd. Shares in Susan Ltd have a fair value of $2.00 per share. The costs of issuing the shares by Susan Ltd costed $2,800
(ii) pay the shareholders of Adam Ltd $1 in cash for each share held in Adam Ltd.
On 1 July 2022, Adam Ltd is currently being sued by a previous customer. The expected damage is $100,000. Lawyers estimate that there is a 10% chance of losing the case.
Susan Ltd incurred $8,000 in costs in relation to accounting and legal fees in relation to its acquisition of Adam Ltd.
Required
(a) Prepare acquisition analysis in relation to Susan Ltd’s acquisition of Jolie Ltd.
(b) Prepare the
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