Essos Ltd Case Summary
Westros Ltd buys a throne building business from Essos Ltd on 1st July 2014. The items are shown at their carrying amount in Essos Ltd’s accounting records and at the fair values estimated by Westros Ltd.
Item
Cost
Accumulated depreciation/ amortisation
Carrying amount
Fair value
$
$
$
$
Accounts receivable
100,000
100,000
90,000
Land and buildings
800,000
400,000
600,000
Plant & Equipment
250,000
200,000
50,000
70,000
Precious metals and jewels
525,000
525,000
570,000
Accounts payable
105,000
105,000
105,000
Included in the purchases by Westros Ltd was an identifiable intangible asset for a Patent developed by Essos Ltd for securing the gilding to the thrones. The Patent has a fair value of $100,000.
The purchase consideration for the business consisted of $750,000 in cash, plus 500,000 ordinary shares in Westros Ltd, fully paid. Westros Ltd ordinary shares are presently trading on the stock exchange for $1.50. Westros Ltd also incurred legal fees of $2,500.
Required:
Prepare the journal entries to record the purchase by Westros Ltd and the payment to Essos Ltd.
Key numbers:
Goodwill $175,000 Question 2 – 10 marks
Arryn Ltd, an Australian company, acquires all the issued shares of Greyjoy Inc, a company operating in the United …show more content…
Included in this $40,000 is $10,000 for insurance and maintenance. An initial amount of $15,000 is payable at the inception of the lease. The contract provides for a guaranteed residual at the end of the lease term of $12,000. The rate of interest implicit in the lease is 12% and the reporting date is 30th June. The machinery will depreciate on a straight line basis and is expected to have an economic useful life of 5 years. At the inception of the lease the machinery had a fair value of
Item
Cost
Accumulated depreciation/ amortisation
Carrying amount
Fair value
$
$
$
$
Accounts receivable
100,000
100,000
90,000
Land and buildings
800,000
400,000
600,000
Plant & Equipment
250,000
200,000
50,000
70,000
Precious metals and jewels
525,000
525,000
570,000
Accounts payable
105,000
105,000
105,000
Included in the purchases by Westros Ltd was an identifiable intangible asset for a Patent developed by Essos Ltd for securing the gilding to the thrones. The Patent has a fair value of $100,000.
The purchase consideration for the business consisted of $750,000 in cash, plus 500,000 ordinary shares in Westros Ltd, fully paid. Westros Ltd ordinary shares are presently trading on the stock exchange for $1.50. Westros Ltd also incurred legal fees of $2,500.
Required:
Prepare the journal entries to record the purchase by Westros Ltd and the payment to Essos Ltd.
Key numbers:
Goodwill $175,000 Question 2 – 10 marks
Arryn Ltd, an Australian company, acquires all the issued shares of Greyjoy Inc, a company operating in the United …show more content…
Included in this $40,000 is $10,000 for insurance and maintenance. An initial amount of $15,000 is payable at the inception of the lease. The contract provides for a guaranteed residual at the end of the lease term of $12,000. The rate of interest implicit in the lease is 12% and the reporting date is 30th June. The machinery will depreciate on a straight line basis and is expected to have an economic useful life of 5 years. At the inception of the lease the machinery had a fair value of