Reference no: EM132535064

Hell Ltd made an offer to the directors of Lo Ltd, that has been accepted for a purchase consideration of $150,000 to acquire the following: Assets; except cash at bank

Liabilitities; except debentures

The purchase consideration payable is to consist of $50,000 cash and 50,000 $2 shares fully-paid in Hell Ltd.

In determining the purchase consideration, it was agreed that some of Lo's assets would be valued as follows:

Accounts Receivable $ 50,000

Inventory $ 30,000

Property, Plant & Equipment $ 120,000

The summary balance sheets of the two companies prior to the acquisition are:

Summary Balance sheet

                                                    Hell Ltd                              Lo Ltd

Assets

Bank                                    100,000                        50,000

Accounts Receivable                120,000                        60,000

Inventory                                  180,000                     70,000

Property, Plant & Equipment (net)  200,000                      80,000

Total Assets                               600,000                  260,000

6% Debentures                              90,000                  60,000

Other Liabilitities                            110,000                100,000

Total Liabilitites                             200,000                 160,000

Net Assets                                     400,000              100,000

Equity

Share Capital

- $2.00 fully paid shares 300,000 Nil

Share Capital

- $1.00 fully paid shares Nil 80,000

General Reserve 60,000 Nil

Retained Earnings 40,000 20,000

400,000 100,000

Question a) Prepare journal entries to record the acquisition in the books of Hell Ltd

Question b) Prepare balance sheet of Hell Ltd after the amalgamation