Accounting at acquisition date by the acquirer On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued...

Accounting at acquisition date by the acquirer

On 1 July 2019, Brad Ltd acquired all of the assets and liabilities of Pitt Ltd. In exchange for these assets and liabilities, Brad Ltd issued 100 000 shares that at date of issue had a fair value of $5.20 per share. Costs of issuing these shares amounted to $1000. Legal costs associated with the acquisition of Pitt Ltd amounted to $1200.

The asset and liabilities of Pitt Ltd at 1 July 2019 were as follows:

                                                                                      Carrying amount                                      Fair value

Assets

         Cash                                                                          $2000                                                         $2000

         Accounts receivable                                                  10000                                                          10000

              Inventories                                                            64000                                                          64000

             Equipment                                                             320000                                                        232000

              Accumulated depreciation- equipment                   (96000)                                                          ­--

                Patents                                                                  240000                                                     280000

Liabilities

     Accounts Payable                                                              (16000)                                                       (16000)

    Debentures                                                                         (64000)                                                      (64000)

Required

• Prepare the acquisition analysis at 1 July 2019 for the acquisition of Pitt Ltd by Brad Ltd.


• Prepare the journal entries in the records of Brad Ltd at 1 July 2019.


• Prepare the journal entries in the records of Brad Ltd assuming that the shares issued by Brad Ltd had a fair value of $4.80.