Required: 1. Prepare the acquisition analysis in relation to the acquisition to determine the gain on bargain purchase or goodwill. 2. Prepare the journal entries in the records of Gold Ltd to record its acquisition of Silver Ltd on 1 June 2023. 3. Prepare the statement of financial position of Gold Ltd after completion of the business combination.
Gold Ltd purchased Silver on 1 June 2023, acquiring all of the assets and liabilities.
The price agreed on was $60, 000, payable $20, 000 in cash and the balance by the issue to Silver Ltd of 16, 000 fully paid shares in Gold Ltd, these shares having a fair value of $2.50 per share.
The balances of the two companies accounts as at 1 June 2023 were as follows:
Gold Ltd Silver Ltd
Cash 30,000 -
Accounts receivable 8,000 20,000
Inventory 14,000 26,000
Plant (net) 50,000 30,000
Government bonds 12,000 -
Total assets 114,000 86,000
Accounts payable 2,000 20,000
Retained earnings 12,000 (24,000)
Share capital 100,000 90,000
Total liabilities and equity 114,000 86,000
All the identifiable net assets of Silver Ltd were recorded by Silver Ltd at fair value except for the inventories, which were considered to be worth $28,000. The plant had an expected remaining life of 5 years. Gold Ltd incurred incidental costs of $500 in relation to the acquisition. Costs of issuing shares in Gold Ltd were $400.
Required:
1. Prepare the acquisition analysis in relation to the acquisition to determine the gain on bargain purchase or goodwill.
2. Prepare the
3. Prepare the
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