Question

Pure Water Systems Inc. (PWS) is a Canadian public company. On December 31, 2018, PWS acquired common shares of Sweet Water Corp. (SWC). Below are three independent questions based on different scenarios for the number of shares acquired and how the shares are acquired. All the scenarios the same initial financial data. SWC's comparative statement of financial position as at December 31, 2019, and its statement of comprehensive income for the year ended December 31, 2019 are as follows: Sweet Water Corp. Statement of financial position As at December 31 in '000s) 2019 2018 Cash $ 479 $ 185 Accounts & other receivables 635 520 Inventory 460 345 Note receivable 100 0 Land 450 500 Building (net) 294 310 Equipment (net) 478 420 Patent 100 Total assets $2.976 $2.380 Accounts payable & accrued liabilities $ 480 $ 460 Long-term debt 900 900 Common shares 500 500 Retained earnings 1.096 520 Total liabilities and equity $2.976 $2,380 Sweet Water Corp. Statement of comprehensive income For the year ended December 31, 2019 (in '000s) Sales revenue Cost of goods sold Gross profit Sales, general and admin expenses Interest expense Depreciation and amortization expense $3,160 1.208 1,952 626 45 1.213 80 Other income Earnings before income tax expense Income tax expense Net income 1.293 517 776

Answer 1

Answerin as given Business purchase - 1300000 Net assets taken over by pues from sucz 1145000 now, we Can Calculate the total assets as beloco. Total assets - Cash + accocent & other receivablet inventory tland + building t quipment + patent Total afets = 185000+520000 + 315000 +525000 + 380000+ 340000 + 200000 - 515000 → Accounts payable and accoued liabilities = 460000 → Long term debt : 910000

Total liabilities Coill be 460000 + 910000 ? 1370000 Now, net a ssels - Total assels - total léabilities = 2515000 - 1370000 = (145000 Good will paid by pws to swc (acquisition differential). - 155000 b) > Due Entry fe busines acquired Business purchase AC DY: $1300000 to liquidator of Swe AC $ 1300000

- Incorporation of assets and liabilities taken over Cash Alo Dr. $185000 Accounts & other receivables Alc Dr. $520000 Enventory Alo Dr. $ 315000 Land Alo Dr. $585000 Building Ala Dr. $380000 Equipment Atc DX. $390000 Patent ale Dr. $200000 Good will AK Dy. $155000 → as determined - above 10 accounts payable & accoued liabilities Al $460000 To long form Debl Alc $ 90000 TO .business purchase ALC $1300000 > Now take the purchase Cobideration of discharge

Liquidator of Swe ALC D8. $1300000 So, we can say that to banks Alc $1300000