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.