Pax Limited showed the following assets and liabilities in its financial statements at 31 December 2018. DETAILS CARRYING AMOUNT FAIR VALUE PPE 10,000,000 14,000,000 Inventory 4,200,000 4,400,000 Long Term Loans (3,500,000) (3,500,000) Account Payable (2,500,000) (2,500,000) 8,200,000 12,400,000 The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assets and liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement of the acquisition. Required: Calculate the purchase consideration. Calculate the goodwill or bargain purchase for this transaction. Prepare the journal entries required in the books of Chelsea Limited relating to this transaction.
Pax Limited showed the following assets and liabilities in its financial statements at 31 December 2018. DETAILS CARRYING AMOUNT FAIR VALUE PPE 10,000,000 14,000,000 Inventory 4,200,000 4,400,000 Long Term Loans (3,500,000) (3,500,000) Account Payable (2,500,000) (2,500,000) 8,200,000 12,400,000 The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assets and liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement of the acquisition. Required: Calculate the purchase consideration. Calculate the goodwill or bargain purchase for this transaction. Prepare the journal entries required in the books of Chelsea Limited relating to this transaction.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Pax Limited showed the following assets and liabilities in its financial statements at 31 December 2018.
|
DETAILS |
CARRYING AMOUNT |
FAIR VALUE |
|
PPE |
10,000,000 |
14,000,000 |
|
Inventory |
4,200,000 |
4,400,000 |
|
Long Term Loans |
(3,500,000) |
(3,500,000) |
|
Account Payable |
(2,500,000) |
(2,500,000) |
|
8,200,000 |
12,400,000 |
The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assets and liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement of the acquisition.
Required:
- Calculate the purchase consideration.
- Calculate the
goodwill or bargain purchase for this transaction. - Prepare the
journal entries required in the books of Chelsea Limited relating to this transaction.
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