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