Nat Ltd purchases a 100 per cent interest in Angourie Ltd. The cost of the acquisition is $1 400 000 plus associated legal costs of $70 000. As at the date of acquisition, the statement of financial position of Angourie Ltd shows:

Additional information

1. The assets and liabilities of Angourie Ltd are fairly stated except for land and buildings, which have a fair value of $800000.
2. Angourie Ltd has a brand name that is not recognised on the statement of financial position and that has a fair value of $50000.
3. There are no contingent liabilities.

REQUIRED

a. Determine, for accounting purposes, the amount of goodwill that has been acquired by Nat Ltd.

b. Why do you think that Nat Ltd would have been prepared to pay for goodwill?

c. Can Nat Ltd revalue the goodwill upwards in a subsequent period?

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Assets Current assets Cash Accounts receivable Allowance for doubtful debts Inventory Total current assets Non-current assets Liabilities Current liabilities Accounts payable Bank overdraft Total current liabilities Non-current liabilities S Bank loan Total liabilities Net assets 80 000 (10 000) LA Land and buildings, at cost 850 000 Accumulated depreciation-land and buildings (150 000) 700 000 Plant and equipment 510 000 Accumulated depreciation-plant and equipment (100 000) 410 000 Total non-current assets 1 110 000 Total assets 20 000 70 000 100 000 190 000 90 000 20 000 110 000 190 000 5 1 300 000 300 000 1 000 000