Question 3 (7 marks)

1. What is a business combination and which Australian accounting standard deals with this topic? (2 marks)
2. Does any goodwill or bargain purchase need to be reported on acquisition? If so, where is the goodwill / bargain purchase amount reported? (2 marks)
3. Parma Ltd purchased a parcel of assets and liabilities comprising a business directly from Pauls Pty Ltd. The parcel, measured at net fair values, consisted of:

Balance of Accounts:

Plant 250,000

Land 340,000

Vehicles 320,000

Accounts receivable 130,000

Accounts payable (148,000)

Total 892,000

Required:

Prepare journal entries to record the acquisition by Parma Ltd, if the cost of acquisition was $1,100,000 cash. (3 marks)