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Federation Ltd acquired the net assets of an existing business Nigeria Pty Ltd on 1 July 2015. The statement of financial position of Federation Ltd immediately prior to the acquisition is as shown below:

                                           Federation Ltd

                     Statement of Financial Position as at 1 July 2015
Assets              
Cash at bank                                 40,000
Accounts Receivable                    95,000
Inventory                                     110,000
Shares in Wesfarmer’s Ltd           80,000
Plant and Equipment (net)         550,000
Land and Buildings (net)           650,000

Total Assets                                                                  1,525,000
Liabilities
Accounts Payable                      220,000
Provisions                                    80,000
Bank Loans                               200,000

Total Liabilities                                                               500,000

Shareholder’s Equity
Issued Capital                            900,000
Retained Earnings                     125,000

Total Shareholder’s Equity                                          1,025,000  
                                                                                     1,525,000     

The identifiable net assets of Nigeria Pty Ltd acquired by FederationLtd , valued at fair value at date of acquisition comprise the following:

Assets acquired:
Accounts Receivable                         20,000
Inventory                                           60,000
Motor Vehicles                                 50,000
Plant and Equipment                       150,000  
Land and Buildings                         300,000

Liabilities assumed:
Accounts Payable                             105,000
Bank Loan                                        100,000

In addition Nigeria Pty Ltd has unrecorded contingent liabilities estimated at $65,000


The terms of the acquisition are as follows:

-    Cash consideration of $120,000 to be paid to Nigeria Pty Ltd on 30 June 2016. This amount is to be raised by a bank loan  (Federation Ltd’s incremental borrowing rate is 8%)
-    The shares in Wesfarmers held by Federation Ltd which have a fair market value of  $90,000 at 1 July 2015 are to be transferred to Nigeria Ltd.
-    Federation Ltd is to issue 50,000 shares to Nigeria Pty Ltd . At 1 July 2015 Federation Ltd’s shares are trading at $4 per share.
-    Federation Ltd incurred legal expenses of $10,000 and share issue costs of $4,000 in connection with the acquisition
-    Under the terms of the acquisition Federation Ltd is required to issue further shares to Nigeria Pty Ltd if the value of Federation Ltd’s shares fall below $4 per share by 30 June 2016. It is estimated that there is a 20% likelihood that the share price will fall to $3.50 by 30 June 2016.   

Required:
Prepare the journal entries in the books of Federation  Ltd to record the acquisition of Nigeria Pty Ltd and aTrail balance with entries then a statement of financial position for Federation  Ltd immediately after the acquisition.
Example for trail balance with adjusted


                                                     Trail balance
items    amount    Adjusted
Dr    Adjusted
Cr    Trail balance adjusted


Accounting

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