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Question - Rivit Ltd acquired all assets and liabilities of Steel Ltd on 31 December 2020. The carrying amount and fair value of assets and liabilities taken over are as follows:
Carrying amount ($)
Fair value ($)
Assets
Cash
5,000
Accounts Receivables
750,000
720,000
Inventory
1,200,000
1,500,000
Property, Plant and Equipment (Net)
600,000
700,000
Liabilities
Accounts payable
250,000
Provision for annual leave
150,000
In addition, due diligence identified the existence of a Trademarks that was valued by an expert at $125,000. The due diligence process also uncovered contingent liabilities (Guarantee Payable) that were measured at $75,000.
The consideration paid was $2,450,000.
Required -
1. Calculate the amount of goodwill that would be recorded in the books of Rivit Ltd following the acquisition of Steel Ltd. Show all workings.
2. Record the journal entries for Rivit Ltd at acquisition date.
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