Chapter 25 Selected exercises suggested solutions

Exercise 25.1
Accounting by an acquirer

On 1 July 2023, Sonic Ltd acquired the following assets and liabilities from Screwdriver Ltd.
Carrying
amount Fair value
Land $ 600  000 $ 700  000
Plant (cost $800  000) 560  000 580  000
Inventories 160  000 170  000
Cash 30  000 30  000
Accounts payable (40  000) (40  000)
Loans (160  000) (160  000)

In exchange for these assets and liabilities, Sonic Ltd issued 200  000 shares that had been issued
for $2.20 per share but at 1 July 2023 had a fair value of $4.50 per share.

Required
1. Prepare the journal entries in the records of Sonic Ltd to account for the acquisition of the
assets and liabilities of Screwdriver Ltd.
2. Prepare the journal entries assuming that the fair value of Sonic Ltd shares was $4 per share.
(LO6)

SONIC LTD – SCREWDRIVER LTD

Acquisition analysis:

Net fair value of identifiable assets and liabilities acquired:

Land $700 000
Plant 580 000
Inventories 170 000
Cash 30 000
1 480 000

Accounts payable 40 000

Loans 160 000
200 000
Net assets $1 280 000

Consideration transferred:
200 000 shares at $4.50 each $900 000

Gain on bargain purchase = $1 280 000 - $900 000 = $380 000

1. Journal entries: Sonic Ltd, FV of shares = $4.50:

Land Dr 700 000
Plant Dr 580 000
Inventories Dr 170 000

1
 Cash Dr 30 000
Gain on bargain purchase Cr 380 000
Accounts payable Cr 40 000
Loans Cr 160 000
Share capital Cr 900 000

2. Journal entries: Sonic Ltd, FV of shares = $4.00:

Fair value of acquiree’s net assets $1 280 000

Consideration transferred: 200 000 x $4 $800 000
Gain on bargain purchase $480 000

Land Dr 700 000
Plant Dr 580 000
Inventories Dr 170 000
Cash Dr 30 000
Accounts payable Cr 40 000
Loans Cr 160 000
Share capital Cr 800 000
Gain on bargain purchase Cr 480 000

Exercise 25.2
Accounting by an acquirer

Tony Ltd acquired all the assets and liabilities of Jennings Ltd on 1 July 2024. At this date, the
assets and liabilities of Jennings Ltd consisted of:

In exchange for these net assets, Tony Ltd agreed to:

• issue 10 Tony Ltd shares for every Jennings Ltd share — Tony Ltd shares were considered to
have a fair value of $10 per share; costs of share issue were $500
• transfer a patent to the former shareholders of Jennings Ltd — the patent was carried in the
records of Tony Ltd at $350  000 but was considered to have a fair value of $1 million
• pay $5.20 per share in cash to each of the former shareholders of Jennings Ltd.

Tony Ltd incurred $10  000 in costs associated with the acquisition of these net assets.

2
Required
1. Prepare an acquisition analysis in relation to this acquisition.
2. Prepare the journal entries in Tony Ltd to record the acquisition at 1 July 2024.
(LO6)

TONY LTD – JENNINGS LTD

1. Acquisition analysis:

Fair value of identifiable assets and liabilities acquired:

Current assets $980 000

Non-current assets 4 220 000
5 200 000
Liabilities 500 000
$4 700 000

Consideration transferred:

Shares: 100 000 x 10 x $10 $10 000 000

Patent 1 000 000
Cash: 100 000 x $5.20 520 000
$11 520 000

Goodwill = $11 520 000 - $4 700 000 = $6 820 000

2. Journal entries for Tony Ltd:

Patent Dr 650 000
Gain Cr 650 000
(Re-measurement as part of consideration
transferred in a business combination)

Current assets Dr 980 000

Non-current assets Dr 4 220 000
Goodwill Dr 6 820 000
Liabilities Cr 500 000
Share capital Cr 10 000 000
Patent Cr 1 000 000
Cash Cr 520 000
(Acquisition of Jennings Ltd)

Acquisition-related expenses Dr 10 000

Cash Cr 10 000
(Payment of directly attributable costs)

Share capital Dr 500

Cash Cr 500
(Costs of issuing shares)

3
Exercise 25.3
Accounting by an acquirer

David Ltd, a supplier of snooker equipment, agreed to acquire the business of a rival company,
Tennant Ltd, taking over all assets and liabilities as at 1 June 2023.

The price agreed on was $60  000, payable $20  000 in cash and the balance by the issue to the
selling company of 16  000 fully paid shares in David Ltd, these shares having a fair value of $2.50
per share.

The trial balances of the two companies as at 1 June 2023 were as follows.

All the identifiable net assets of Tennant Ltd were recorded by Tennant Ltd at fair value except for
the inventories, which were considered to be worth $28  000 (assume no tax effect). The plant had
an expected remaining life of 5 years.

The business combination was completed and Tennant Ltd went into liquidation. David Ltd
incurred incidental costs of $500 in relation to the acquisition. Costs of issuing shares in David Ltd
were $400.

Required
1. Prepare the journal entries in the records of David Ltd to record the business combination.
2. Show the statement of financial position of David Ltd after completion of the business
combination.
(LO6)
Acquisition analysis:

Consideration transferred: cash $20 000

shares (16 000 x $2.50) $40 000
$60 000

Net fair value of identifiable assets and liabilities acquired:

Plant $30 000
Inventories 28 000
Accounts receivable 20 000
$78 000
Accounts payable (20 000)

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 $58 000

Note that goodwill carried by Tennant Ltd is not an identifiable asset. Therefore:
Net fair value of identifiable assets and liabilities acquired $58 000
Consideration transferred $60 000
Goodwill $2 000

The journal entries are:

Plant Dr 30 000
Inventories Dr 28 000
Accounts receivable Dr 20 000
Goodwill Dr 2 000
Cash Cr 20 000
Accounts payable Cr 20 000
Share capital Cr 40 000
(Net assets acquired from Tennant Ltd and issue of shares)

Acquisition-related expenses Dr 500

Cash Cr 500
(Payment of acquisition-related costs)

Share capital Dr 400

Cash Cr 400
(Share issue costs)

2.
DAVID LTD
Statement of Financial Position
as at 1 June 2023

Current Assets $
Cash 9 1001
Accounts receivable 28 000
Inventories 42 000
Total Current Assets 79 100
Non-current Assets
Plant 80 000
Government bonds 12 000
Goodwill 2 000
Total Non-current Assets 94 000
Total Assets 173 100
Current Liabilities
Accounts payable 22 000
Net Assets 151 100
Equity
Share capital 139 6002
Retained earnings 11 5003
Total Equity 151 100

5
1. $30 000 – $20 000 (cash paid as consideration) – $500 (acquisition-related expenses) –
$400 (share issue costs)
2. $100 000 + $40 000 (shares issued as consideration) – $400 (share issue costs)
3. $12 000 – $500 (acquisition-related expenses)
Exercise 25.4
Consideration transferred

On 1 September 2022, the directors of Toby Ltd approached the directors of Bailey Ltd with the
following proposal for the acquisition of the issued shares of Bailey Ltd, conditional on acceptance
by 90% of the shareholders of Bailey Ltd by 30 November 2022.
• Two fully paid ordinary shares in Toby Ltd plus $6.20 cash for every preference share in Bailey
Ltd, payable at acquisition date.
• Three fully paid ordinary shares in Toby Ltd plus $2.40 cash for every ordinary share in Bailey
Ltd. Half the cash is payable at acquisition, and the other half in one year’s time.

By 30 November, 90% of the ordinary shareholders and all of the preference shareholders of
Bailey Ltd had accepted the offer. The directors of Toby Ltd decided not to acquire the remaining
ordinary shares. Share transfer forms covering the transfer were dated 30 November 2022, and
showed a price per Toby Ltd ordinary share of $8.40. Toby Ltd’s incremental borrowing rate is 8%
p.a.

Toby Ltd then appointed a new board of directors of Bailey Ltd. This board took office on 1
December 2022 and immediately:
• revalued the asset Shares in Other Companies to its market value (assume no tax effect)
• used the surplus so created to make a bonus issue of $64  000 to ordinary shareholders, each
shareholder being allocated two ordinary shares for every ten ordinary shares held.

The statement of financial position of Bailey Ltd at 30 November 2022 was as follows.

BAILEY LTD
Statement of financial position
as at 30 November 2022

Current assets $ 240  000

Non‐current assets
Land and buildings $ 406  000
Plant and equipment 336  000
Less: Accumulated depreciation (90  000)
Shares in other companies listed on stock exchange at cost (market $380   60  000
000)
Government bonds, at cost 100  000
Total non‐current assets 812  000
Total assets 1 052  000
Current liabilities 60  000
Net assets 992  000

Equity

6
 Share capital
160  000 ordinary shares fully paid 320  000
100  000  6% preference shares fully paid 200  000 520  000
Retained earnings 472  000
Total equity $ 992  000

Required
Prepare all journal entries (in general form) to record the above transactions in the records of (a)
Toby Ltd and (b) Bailey Ltd. (LO6)

Consideration transferred to preference shareholders:

Cash = $6.20 x 100 000
= $620 000
Shares = (2 x 100 000) x $8.40
= $1 680 000

Consideration transferred to ordinary shareholders:

Cash = ($2.40 x ½ x 144 000)
+ ($2.40 x ½ x 144 000 x 0.9259 [T1 8% 1yr])
= $172 800 + $160 000
= $332 800
Shares = (3 x 144 000) x $8.40
= $3 628 800

Total = $952 800 (Cash) + $4 308 800 (shares)

= $5 261 600
(a) Journal entries: Toby Ltd:

30/11/22
Preference shares in Bailey Ltd Dr 2 300 000
Cash Cr 620 000
Share capital Cr 1 680 000
(Acquisition of all preference shares of Bailey Ltd)

Ordinary shares in Bailey Ltd Dr 3 961 600

Cash Cr 172 800
Payable to ex-Bailey Ltd shareholders Cr 160 000
Share capital Cr 3 628 800
(Acquisition of 90% of the ordinary shares of Bailey Ltd)

30/11/23
Payable (to ex-Bailey Ltd shareholders) Dr 160 000
Interest expense Dr 12 800
Cash Cr 172 800
(Payment of deferred amount)

(b) Journal entries: Bailey Ltd:

7
1/12/22
Shares in other companies Dr 380 000
Asset revaluation surplus Cr 380 000
(Revaluation of asset)

1/12/22
Asset revaluation surplus Dr 64 000
Bonus dividend payable Cr 64 000
(Declaration of bonus dividends)

Bonus dividend payable Dr 64 000

Share capital – Ordinary Cr 64 000
(Issue of 32 000 ordinary shares as bonus share dividend)

Exercise 25.5
Accounting by an acquirer

Penny Ltd is seeking to expand its share of the widgets market and has negotiated to take over the
operations of Robinson Ltd on 1 January 2024. The statements of financial position of the two
companies as at 31 December 2023 were as follows.

Penny Ltd is to acquire all the identifiable assets, except cash, of Robinson Ltd. The assets of
Robinson Ltd are all recorded at fair value except the following.

8
In exchange, Penny Ltd is to provide sufficient extra cash to allow Robinson Ltd to repay all of its
outstanding debts and its liquidation costs of $2400, plus two fully paid shares in Penny Ltd for
every three shares held in Robinson Ltd. The fair value of a share in Penny Ltd is $3.20.

Costs of issuing the shares were $1200.

Required
Prepare the acquisition analysis and journal entries to record the business combination in the
records of Penny Ltd. (LO6)

Net fair value of identifiable assets and liabilities acquired:

Accounts receivable $34 700

Inventory 39 000
Freehold land 130 000
Buildings 40 000
Plant and equipment 46 000
$289 700
Consideration transferred:

Shares: 2/3 x 60 000 x $3.20 $128 000

Cash to cover the following liabilities:

Accounts payable $45 100
Mortgage and interest 44 000
Debentures and premium 52 500
Liquidation expenses 2 400
144 000
Cash already held by Robinson (12 000)
$132 000

Total consideration transferred $260 000

Gain on bargain purchase = $289 700 - $260 000 = $29 700

The journal entries to record the business combination in the journal of

Penny Ltd are:

Accounts receivable Dr 34 700

Inventory Dr 39 000
Freehold land Dr 130 000
Buildings Dr 40 000
Plant and equipment Dr 46 000
Cash Cr 132 000
Share capital Cr 128 000
Gain on bargain purchase Cr 29 700
(Acquisition of net assets of Robinson Ltd and shares issued)

Share capital Dr 1 200

Cash Cr 1 200
(Costs of issuing shares)

9
10
Exercise 25.6

Accounting for business combination by acquirer

Police Ltd and Box Ltd are small family-owned companies engaged in vegetable growing and
distribution. The Jones family owns the shares in Box Ltd and the Tyler family owns the shares in
Police Ltd. The head of the Jones family wishes to retire but his two sons are not interested in
carrying on the family business. Accordingly, on 1 July 2024, Police Ltd is to take over the
operations of Box Ltd, which will then liquidate. Police Ltd is asset-rich but has limited overdraft
facilities so the following arrangement has been made.

Police Ltd is to acquire all of the assets, except cash, delivery trucks and motor vehicles, of Box Ltd
and will assume all of the liabilities except accounts payable. In return, Police Ltd is to give the
shareholders of Box Ltd a block of vacant land, two delivery vehicles and sufficient additional cash
to enable the company to pay off the accounts payable and the liquidation costs of $1500. On the
liquidation of Box Ltd, Mr Jones to receive the land and the motor vehicles and his two sons are to
receive the delivery trucks. The land and vehicles had the following market values at 30 June 2024.

The statements of financial position of the two companies as at 30 June 2021 were as follows.

All the assets of Box Ltd are recorded at fair value, with the exception of:

11
Required
1. Prepare the acquisition analysis and the journal entries to record the acquisition of Box Ltd’s
operations in the records of Police Ltd.
2. Prepare the statement of financial position of Police Ltd after the business combination.
(LO6)

POLICE LTD – BOX LTD

1. Acquisition analysis:

Fair value of identifiable assets and liabilities acquired:

Accounts receivable $15 000

Freehold land 120 000
Buildings 40 000
Cultivation equipment 40 000
Irrigation equipment 22 000 $237 000

Loan – Bank of Gallifrey (80 000)

Loan – Williams Bros (35 000)
Loan – Smith Corp. (52 500) 167 500
$69 500

Consideration transferred:

Freehold land $120 000

Delivery trucks 28 000
Cash to cover liabilities
Accounts payable $23 500
Liquidation expenses 1 500 $25 000
Cash held (2 000) 23 000
$171 000

Goodwill = $171 000 - $69 500 = $101 500

Freehold land Dr 70 000

Gain on revaluation of land Cr 70 000
(Re-measurement of land as part of consideration transferred)

Loss on revaluation of delivery trucks Dr 2 000

Delivery trucks Cr 2 000
(Re-measurement of delivery trucks as part of consideration transferred)

Accounts receivable Dr 15 000

12
 Freehold land Dr 120 000
Buildings Dr 40 000
Cultivation equipment Dr 40 000
Irrigation equipment Dr 22 000
Goodwill Dr 101 500
Loan – Bank of Gallifrey Cr 80 000
Loan – Williams Bros Cr 35 000
Loan – Smith Corp Cr 52 500
Freehold land Cr 120 000
Delivery trucks Cr 28 000
Cash Cr 23 000
(Acquisition of net assets of Box Ltd)
2.
POLICE LTD
Statement of Financial Position
as at 1 July 2024

Current Assets
Accounts receivable (25 000 + 15 000) $40 000
Total Current Assets 40 000
Non-Current Assets
Freehold land (250 000 + 70 000 – 120 000 + 120 000) 320 000
Buildings (25 000 + 40 000) 65 000
Cultivation equipment (65 000 + 40 000) 105 000
Irrigation equipment (16 000 + 22 000) 38 000
Delivery trucks (45 000 – 2000 – 28 000) 15 000
Motor vehicles 25 000
Goodwill 101 500
Total Non-current Assets 669 500
Total Assets 709 500

Current Liabilities
Bank overdraft (3 500 – 23 000) 19 500
Accounts payable 26 000
Total Current Liabilities 45 500
Non-current Liabilities
Loan – Bank of Gallifrey (150 000 + 80 000) 230 000
Loan – Williams Bros (35 000 + 35 000) 70 000
Loan – Smith Corp (70 000 + 52 500) 122 500
Total Non-current Liabilities 422 500
Total Liabilities 468 000
Net Assets $241 500

Equity
Share capital $100 000
Other reserves 28 500
Retained earnings (45 000 + 70 000 – 2 000) 113 000
Total Equity $241 500

13
Exercise 25.7
Accounting for business combination by acquirer

Yarra Ltd and River Ltd are two family-owned flax-producing companies in Queensland. Yarra Ltd
is owned by the Jones family and the Smith family owns River Ltd. The Jones family has only one
son and he is engaged to be married to the daughter of the Smith family. Because the son is
currently managing River Ltd, it is proposed that, after the wedding, he should manage both
companies. As a result, it is agreed by the two families that Yarra Ltd should take over the net
assets of River Ltd.
The statement of financial position of River Ltd immediately before the takeover is as follows.

Carrying
amount Fair value
Cash $ 10  000 $ 10  000
Accounts receivable 70  000 62 500
Land 310  000 420  000
Buildings (net) 265  000 275  000
Farm equipment (net) 180  000 182  000
Irrigation equipment (net) 110  000 112  500
Vehicles (net) 80  000 86  000
$ 1  025  000
Accounts payable $ 40  000 40  000
Loan — Trevally Bank 240  000 240  000
Share capital 335  000
Retained earnings 410  000
$ 1  025  000

The takeover agreement specified the following details.

• Yarra Ltd is to acquire all the assets of River Ltd except for cash, and one of the vehicles
(having a carrying amount of $22 500 and a fair value of $24  000), and assume all the
liabilities except for the loan from the Trevally Bank. River Ltd is then to go into liquidation.
The vehicle is to be transferred to Mr and Mrs Smith.
• Yarra Ltd is to supply sufficient cash to enable the debt to the Trevally Bank to be paid off and
to cover the liquidation costs of $2750. It will also give $75  000 to be distributed to Mr and
Mrs Smith to help pay the costs of the wedding.
• Yarra Ltd is also to give a piece of its own prime land to River Ltd to be distributed to Mr and
Mrs Smith, this eventually being available to be given to any offspring of the forthcoming
marriage. The piece of land in question has a carrying amount of $40  000 and a fair value of
$110  000.
• Yarra Ltd is to issue 50  000 shares, these having a fair value of $14 per share, to be distributed
via River Ltd to the soon to-be-married-daughter of Mr and Mrs Smith, Dalek is currently a
shareholder in River Ltd.

14
The takeover proceeded as per the agreement, with Yarra Ltd incurring incidental costs of $12 500
and share issue costs of $9  000.
Required
Prepare the acquisition analysis and the journal entries to record the acquisition of River Ltd in the
records of Yarra Ltd. (LO6)

YARRA LTD – RIVER LTD

Acquisition analysis:

Net fair value of identifiable assets and liabilities acquired:

Accounts receivable $62 500

Land 420 000
Buildings 275 000
Farm equipment 182 000
Irrigation equipment 112 500
Vehicles ($86 000 - $24 000) 62 000
1 114 000
Accounts payable 40 000
$1 074 000
Consideration transferred:

Shares: 50 000 x $14 per share $700 000

Cash: $240 000 + $2 750 +$75 000 - $10 000 307 750
Land: 110 000
$1 117 750

Goodwill: $1 117 750 - $1 074 000 = $43 750

The journal entries in Yarra Ltd are:

Land Dr 70 000
Gain on revaluation of land Cr 70 000
(Re-measurement of land as part of consideration transferred)

Accounts receivable Dr 62 500

Land Dr 420 000
Buildings Dr 275 000
Farm equipment Dr 182 000
Irrigation equipment Dr 112 500
Vehicles Dr 62 000
Goodwill Dr 43 750
Accounts payable Cr 40 000
Share capital Cr 700 000
Cash Cr 307 750
Land Cr 110 000
(Acquisition of net assets of River Ltd)

Acquisition-related expenses Dr 12 500

Cash Cr 12 500

15
 (Payment of acquisition-related costs)

Share capital Dr 9 000

Cash Cr 9 000
(Share issue costs)

Exercise 25.11
Acquisition of two businesses

Amy Ltd is a manufacturer of specialised industrial equipment seeking to diversify its operations.
After protracted negotiations, the directors decided to purchase the assets and liabilities of Pond
Ltd and the spare parts retail division of Rory Ltd.

At 30 June 2024 the statements of financial position of the three entities were as follows.

Amy Ltd Pond Ltd Rory Ltd

Land and buildings (net) $ 60  000 $ 25  000 $ 40  000
Plant and equipment (net) 100  000 36  000 76  000
Office equipment (net) 16  000 4  000 6  000
Shares in listed companies 24  000 15  000 20  800
Debentures in listed companies 20  000 0 0
Accounts receivable 35  000 26  000 42  000
Inventories 150  000 54  000 30  200
Cash 59  000 11  000 9  000
Goodwill 0 7  000 0
$ 464  000 $178  000 $ 224  000
Accounts payable $ 26  000 $ 14  000 $ 27  000
Current tax liability 21  000 6  000 7  000
Provision for leave 36  000 10  000 17  500
Bank loan 83  000 16  000 43  500
Debentures 60  000 50  000 0
Share capital (issued at $1, fully paid) 200  000 60  000 90  000
Retained earnings 38  000 22  000 39  000
$ 464  000 $178  000 $ 224  000

The acquisition agreement details are as follows.

Pond Ltd
Amy Ltd is to acquire all the identifiable assets (other than cash) and liabilities (other than
debentures, provisions and tax liabilities) of Pond Ltd for the following purchase consideration:

16
• Shareholders in Pond Ltd are to receive three shares in Amy Ltd, credited as fully paid, in
exchange for every four shares held. The shares in Amy Ltd are to be issued at their fair value
of $3 per share. Costs of share issue amounted to $2000.
• Amy Ltd is to provide sufficient cash which, when added to the cash already held, will enable
Pond Ltd to pay out the current tax liability and provision for leave, to redeem the debentures
at a premium of 5%, and to pay its liquidation expenses of $2500.

The fair values of the assets and liabilities of Pond Ltd are equal to their carrying amounts with the
exception of the following.

Fair value
Land and buildings $ 60  000
Plant and equipment 50  000

Incidental costs associated with the acquisition amount to $2500.

Rory Ltd
Amy Ltd is to acquire the spare parts retail business of Rory Ltd. The following information is
available concerning that business, relative to the whole of Rory Ltd.

Total amount Spare parts division

Carrying Carrying
amount amount Fair value

Land and buildings (net) $ 40  000 $ 20  000 $30  000

Plant and equipment (net) 76  000 32  000 34  500

Office equipment (net) 6  000 2  000 2  500

Accounts receivable 42  000 21  000 20  000

Inventories 30  200 12  000 12  000

Accounts payable 27  000 14  000 14  000

Provision for leave 17  500 7  000 7  000

The divisional net assets are to be acquired for $10  000 cash, plus 11  000 ordinary shares in Amy
Ltd issued at their fair value of $3, plus the land and buildings that have been purchased from
Pond Ltd.

Incidental costs associated with the acquisition are $1000.

Required

17
1. Prepare the acquisition analysis for the acquisition transactions of Amy Ltd.
2. Prepare the journal entries for the acquisition transactions in the records of Amy Ltd.
(LO6)

1. Acquisition Analysis: Amy Ltd – Pond Ltd:

Net fair value of identifiable assets and liabilities acquired:

Land & buildings $60 000

Plant & equipment 50 000
Office equipment 4 000
Shares in listed companies 15 000
Accounts receivable 26 000
Inventories 54 000
209 000
Accounts payable 14 000
Bank loan 16 000
30 000
Net fair value of identifiable assets and liabilities acquired $179 000

Consideration transferred:

Shares in Amy Ltd

Shares issued by Pond Ltd 60 000
Shares in Amy Ltd to issue:
(3/4 x 60 000) 45 000 x $3.00 $135 000

Cash
Current tax liability $6 000
Provision for leave 10 000
Debentures 50 000
5% premium 2 500
Liquidation costs 2 500
71 000
Less cash already held by Pond Ltd 11 000 60 000
Total consideration $195 000

Goodwill: [$195 000 - $179 000] $16 000

Acquisition Analysis: Amy – Rory Ltd’s Spare Parts Retail Division:

Net fair value of identifiable assets and liabilities acquired:

Land & buildings $30 000
Plant & machinery 34 500
Office equipment 2 500
Accounts receivable 20 000
Inventories 12 000
99 000
Accounts payable $14 000
Provision for leave 7 000 21 000

18
 $78 000
Consideration transferred:
Cash $10 000
Shares [11 000 x $3.00] 33 000
Land and Buildings 60 000
$103 000

Goodwill: [$103 000 - $78 000] $25 000

2.
Land & buildings Dr 60 000
Plant & machinery Dr 50 000
Office equipment Dr 4 000
Shares in listed companies Dr 15 000
Accounts receivable Dr 26 000
Inventories Dr 54 000
Goodwill Dr 16 000
Accounts payable Cr 14 000
Bank loan Cr 16 000
Cash Cr 60 000
Share capital Cr 135 000
(Acquisition of assets and liabilities of Pond Ltd and issue of shares)

Share capital Dr 2 000

Cash Cr 2 000
(Payment of costs of issuing shares)
Acquisition-related expenses Dr 2 500
Cash Cr 2 500
(Costs related to acquisition)

Land & buildings Dr 30 000

Plant & machinery Dr 34 500
Office equipment Dr 2 500
Accounts receivable Dr 20 000
Inventories Dr 12 000
Goodwill Dr 25 000
Accounts payable Cr 14 000
Provision for leave Cr 7 000
Cash Cr 10 000
Share capital Cr 33 000
Land & buildings Cr 60 000
(Acquisition of the spare parts retail division of Rory Ltd and issue of shares)

Acquisition-related expenses Dr 1 000

Cash Cr 1 000
(Payment of acquisition-related costs)

19