ACC705: Ben Ltd & Sam Ltd - Accounting Assignment

Accounting Assignment:

Ben Ltd operates a number of supermarkets with an emphasis on the supply of quality produce The operations of Sam Ltd are primarily in the fine fruit market. Believing that the acquisition of Sam Ltd would enable Ben Ltd to expand its supply of quality products to its customers, Ben Ltd commenced actions to acquire the shares of Sam Ltd. On 1 July 2013, Ben Ltd acquired all the issued shares (cum div.) of Sam Ltd for $130 000. At this date the equity of Sam Ltd consisted of: Share capital                              $150 000 Reserves                                      10 000 Retained earnings                     30 000 On 1 July 2013, Sam Ltd had recorded a dividend payable of $6000 and goodwill of $5000 (net of accumulated impairment losses of $7000). The dividend was paid in August 2013. In the previous year’s annual report Sam Ltd had reported the existence of a contingent liability for damages based upon a lawsuit by a customer who had slipped on some fallen fruit in one of the Stores operated by Sam Ltd. Ron Ltd calculated that this liability had a fair value of $9 000. Sam Ltd also had some customer databases that were not recorded as assets but Ron Ltd placed affair value of $6000 on these items. Sam Ltd believed that the databases had a future life of 4 years. All of the identifiable assets and liabilities of Sam Ltd were recorded in amounts equal to their fair values except for the following: Carrying amount                   Fair value Plant (cost $120 000)                      $94 000                                 $96 000 Land                                                    80 000                                   95 000 Inventory                                            20 000                                   26 000 The plant had an expected remaining useful life of 5 years. The land was sold by Sam Ltd in February 2015. All inventories were sold by 30 June 2014. In February 2016, Sam Ltd transferred $3000 of the reserves on hand on 1 July 2013 to retained earnings. The remaining $2000 was transferred in February 2017. The court case involving the damages sought by the customer was settled in May 2017. Sam Ltd was required to pay $7 000 to the customer.