In: Accounting
please answer this
Salad Ltd acquired all the net assets of an existing business, Lettuce Ltd on 1 July 2020. The statements of financial position of the two companies immediately prior to the acquisition were as follows:
Salad Ltd |
Lettuce Ltd |
||
Cash |
$4,200 |
$2,000 |
|
Accounts receivable |
30,000 |
16,500 |
|
Freehold land |
265,000 |
100,000 |
|
Building (net) |
35,000 |
28,000 |
|
Cultivation equipment (net) |
69,000 |
46,000 |
|
Irrigation equipment |
18,000 |
21,000 |
|
Delivery trucks |
46,000 |
36,000 |
|
Motor vehicles |
30,000 |
32,000 |
|
497,200 |
281,500 |
||
Accounts payable |
29,000 |
24,500 |
|
Loan - Bank of NSW |
155,000 |
79,000 |
|
Loan - Bernard Bros |
35,000 |
34,000 |
|
Loan - Golds Corp. |
72,000 |
52,500 |
|
Share capital |
110,000 shares |
110,000 |
- |
60,000 shares |
- |
60,000 |
|
Reserves |
28,500 |
- |
|
Retained earnings |
67,700 |
31,500 |
|
497,200 |
281,500 |
All of the assets of Lettuce Ltd are recorded at fair value, with the exception of:
Fair value |
|
Freehold land* |
120,000 |
Buildings |
40,000 |
Cultivation equipment |
40,000 |
Motor vehicle |
34,000 |
*Fair value excluding Lettuce’s vacant land.
The terms of the acquisition are as follows:
vehicles and the delivery trucks. The land and vehicles had the following values at 1 July 2020:
Carrying amount |
Fair Value |
|
Freehold Land |
$50,000 |
$120,000 |
Delivery Trucks |
30,000 |
27,000 |
Required: