Question

In: Accounting

The balance sheets of E Ltd. and J Ltd. on December 30, Year 6, were as...

The balance sheets of E Ltd. and J Ltd. on December 30, Year 6, were as follows:

E Ltd. J Ltd.
Cash and receivables $ 96,850 $ 21,200
Inventory 58,700 9,850
Plant assets (net) 231,400 72,200
Intangible assets 24,850 7,700
$ 411,800 $ 110,950
Current liabilities $ 64,700 $ 30,100
Long-term debt 99,200 45,200
Common shares 156,400 46,600
Retained earnings (deficit) 91,500 (10,950 )
$ 411,800 $ 110,950

On December 31, Year 6, E Ltd. issued 525 shares, with a fair value of $40 each, for 70% of the outstanding shares of J Ltd. Costs involved in the acquisition, paid in cash, were as follows:

Costs of arranging the acquisition $ 2,670
Costs of issuing shares 1,940
$ 4,610

The carrying amounts of J Ltd.’s net assets were equal to fair values on this date except for the following:

Fair value
Plant assets $ 65,850
Long-term debt 43,400

E Ltd. was identified as the acquirer in the combination.

Required:

(a) Prepare the consolidated balance sheet of E Ltd. on December 31, Year 6, under the identifiable net assets method.

(b) Prepare the consolidated balance sheet of E Ltd. on December 31, Year 6, under the fair value enterprise method.

Solutions

Expert Solution

As per US GAAP / IFRS Assets and liability in case of business combination is recorded at Fair Value


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