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Question - On 1 December 2021, Braddock Ltd purchased a 100% interest in Cele Ltd. The cost of acquisition is $2.5 million plus associated due diligence cost of $65 000. Braddock Ltd has yet recorded the necessary journal entries relating to this acquisition. At the date of acquisition, the statement of financial position of Cele Ltd shows:
$
Assets
Current Assets
Cash
400 000
Accounts receivables
1 100 000
Allowance for impairment of receivables
(210 000)
890 000
Inventories
930 000
Other receivables
680 000
Total current assets
2 900 000
Non-Current Assets
Leasehold land, at cost
230 000
Accumulated amortisation - leasehold land
(25 000)
205 000
Warehouse, at revaluation
180 000
Accumulated depreciation - warehouse
(56 000)
124 000
Plant and machinery, at cost
820 000
Accumulated depreciation - plant and machinery
(350 000)
470 000
Total non-current assets
799 000
Total assets
3 699 000
Liabilities
Current Liabilities
Trade and other payables
650 000
Bank overdrafts
98 000
Current tax liability
53 000
Total current liabilities
801 000
Loan payables
800 000
Total liabilities
1 601 000
Net assets
2 098 000
Additional information
The assets and liabilities of Cele Ltd are fairly stated except for leasehold land which has a fair value of $300 000.
Cele Ltd has a brand name that is not recognised on the statement of financial position and that has a fair value of $49 000.
Cele Ltd is currently being sued by a previous customer on an unfulfilled order. The expected damages are $100 000.
Required - Prepare the Acquisition Analysis for the acquisition of the net assets of Cele Ltd on 1 December 2021. Prepare, for accounting purposes, the required journal entries in the books of Braddock Ltd.
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