Financial and Corporate Accounting Assignment
Almonds Ltd has been negotiating with Raisons Ltd to buy its wholefood section. The purchase takes place on 1^* July 2014. The wholefood section is considered a Cash Generating Unit and the purchased Assets and Liabilities, at their carrying amounts and at the fair values estimated by Almonds Ltd is shown below.
|
Item
|
Cost $
|
Accumulated depreciation/amortization $
|
Carrying amount $
|
Fair value $
|
|
Accounts receivable
|
120,000
|
|
120,000
|
118,000
|
|
Land and building
|
500,000
|
250,000
|
250,000
|
300,000
|
|
Plant & Equipment
|
470,000
|
370,000
|
100,000
|
80,000
|
|
Patent
|
50,000
|
|
50,000
|
65,000
|
|
Account payable
|
110,000
|
|
110,000
|
110,000
|
Included in the purchases by Almonds Ltd was an identifiable intangible asset of a Trademark developed over the years by Raisons Ltd. The Trademark has a fair value of $150,000.
The purchase consideration for the business consisted of 500,000 $2 ordinary shares in Almonds Ltd, paid to $1.20 and $100,000 in cash to be paid half now and half in one year's time. The discount rate is 10% and the Present Value tables are shown on page 9.
Almond Ltd incurred legal fees of $2,500 to process the purchase of the wholefood section and $1,500 of direct costs to issue the shares.
Required: Prepare the journal entries to record the purchase by Almonds Ltd and the total payment to Raisons Ltd.