Eastern Management Ltd acquired all the assets and liabilities of King Ltd on 30 June 2021. The
Question:
Eastern Management Ltd acquired all the assets and liabilities of King Ltd on 30 June 2021. The carrying amount and estimated fair value of assets and liabilities of King Ltd to be taken over are as follows:
Carrying Amount | Fair Value | |
Accounts receivable | 760,000 | 720,000 |
Inventory | 1,300,000 | 1,440,000 |
Property, plant and equipment | 1,680,000 | 1,560,000 |
Accounts payable | 680,000 | 680,000 |
In addition to these assets and liabilities, due diligence identified the existence of brand names that were valued by an expert at $500 000. The due diligence process also uncovered contingent liabilities that were reliably measured at $150,000.
The price paid was $4.8 million (paid by #480,000 Shares in Eastern Management Ltd at $10 per share) and costs of $100,000 were incurred in the purchase ($20,000 for share issue cost and $80,000 for other acquision costs).
Required
- Calculate Goodwill and prepare the acquisition analysis for Taylor Limited (show calculations) (9 marks)
- Prepare the journal entries in the records of Taylor Ltd to record the business combination. (11 marks)
Expert Answer:
