Reference no: EM131115681

Financial accounting exercises for intangibles.

A ltd acquired all the assets and liabilities of B ltd on 1 July 2014. At the date of acquisition, the carrying amount of B ltd identifiable net assets and their fair values are listed below.

                                                    Carrying amount       Fair values
Cash                                                   20,000                 20,000
Account receivable                                800,000               780,000
Provision for doubtful debts                  -10,000               -5,000
Inventory                                            1,600,000            1,480,000
Property,plant and equipment                2,100,000            1,800,000
Accumulated depreciation PP&E              -700,000
Account payable                                   -900,000
Provision for long service leave               -140,000             -190,000

In addition, due diligence identified patents that were valued by an expert at $350,000, a customer list at $150,000 and contingent liabilities were reliably measured at $200,000. The price paid was $4,000,000 and did not include the legal costs of the business combination which were $80,000.

Required

Prepare the general journal entries to record the purchase by A Ltd under AASB 3 Business Combinations and the payment to B Ltd. Narrations is not required.