Calculate the purchase consideration

Assignment Help Financial Accounting

Reference no: EM133497283

Case: 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.

Reference no: EM133497283

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