The directors of Solar Panels Southern Hemisphere Pty Ltd (SPSH), a manufacturer of solar products agreed to sell the bu

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The directors of Solar Panels Southern Hemisphere Pty Ltd
(SPSH), a manufacturer of solar products agreed to sell the
business to a competitor, Climate Change Solutions International
Ltd (CCSI). The financial statements of Solar Panels Southern
Hemisphere Pty Ltd at 1 July 2020 contained the following
information:
Assets
Current assets
Cash
18,750
Accounts receivable
38,000
Inventories
250,000
Total current assets
306,750
Non-current assets
Vehicles
112,000
Accumulated depreciation
18,000
Machinery
1,500,000
Accumulated depreciation
850,000
Buildings
2,100,000
Accumulated depreciation
210,000
Land
750,000
Product Development costs
256,000
Total non-current assets
3,640,000
Total assets
3,946,750
Liabilities
Accounts payable
178,000
Other payables
55,000
Provisions
250,000
Loans
2,200,000
Total liabilities
2,683,000
Equity
Share capital - 50,000 shares
102,000
Retained earnings
1,161,750
Total equity
1,263,750
An agreement was made whereby CCSI takes over SPSH to acquire
all the assets and liabilities of SPSH, except for the cash, motor
vehicles and accounts payable. In exchange, CCSI will give
the shareholders of SPSH a block of land valued at $400,000, a
motor vehicle valued at $45,400 and current shareholders will
receive shares in CCSI worth $50 per share. The land is
carried at a cost of $250,000 while the motor vehicle is carried at
$39,000, comprising the cost of $54,000 and accumulated
depreciation of $15,000. CCSI will also provide sufficient
additional cash to enable SPSH to pay off the accounts payable and
the liquidation expenses of $10,000.
CCSI recognised the brand ‘Solar Panels Southern Hemisphere’
that was not recognised in the records of SPSH as it was an
internally developed brand. It was calculated that this brand
had a fair value of $500,000. CCSI also incurred legal and
valuation costs of $7,500 in undertaking the business
combination.
The assets and liabilities of SPSH are recorded at amounts equal
to fair value except for the following:
Fair Value
Land
1,200,000
Buildings
2,500,000
Machinery
900,000
Inventories
290,000
Required: