Business, 30.07.2021 03:40 lerinmarie
Taya’s Cookie Store Corp. (TCS), a Canadian company that reports its financial statements in accordance with IFRS, acquired 100% of the net assets of Jaxxen’s Flour Shop Inc. (JFS) on December 31, 20X4, for $500,000 cash. JFS’s statement of financial position as at December 31, 20X4, is as follows:
Jaxxen’s Flour Shop Inc. Statement of financial position
As at December 31, 20X4
(in ’000s)
Cash $ 24
Accounts receivable and accruals 64
Inventory 61
Land 190
Equipment (net) 200
Total assets $ 539
Accounts payable and accruals $ 19
Long-term debt 300
Common shares 100
Retained earnings 120
Total liabilities and equity $ 539
The fair value of JFS’s identifiable net assets at time of acquisition differed from its book value as indicated below (in $’000s):
Book value
Dec. 31, 20X4
Fair value
Dec. 31, 20X4
Est. remaining useful life/term to maturity Estimated residual value Inventory 61 66 N/A N/A Land 190 220 N/A N/A Equipment (net) 200 185 5 years $— Patent — 20 10 years $— Long-term debt 300 290 5 years N/A
Required:
a) Use the acquisition method to allocate the acquisition differential and determine goodwill arising on acquisition.
b) Prepare TCS’s journal entry to record the acquisition. Support the journal entry with a brief explanation as to its nature.
Answers: 3
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