Cruz Limited acquired control of Negril Industries Limited (NIL) by giving 3 shares in Cruz Limited for every 5 shares held in NIL. Cruz Limited acquired 5,200,000 shares in NIL and at that date each share in Cruz Limited was $6.50. An additional sum of $9,600,000 was to be paid four years from now (the relevant discount rate is 15%).

The identifiable assets and liabilities of Golden Acres Limited were:

.Assets Value $

Property, Plant and Equipment 7,000,000

Current assets 3,000,000

Trade Payables 6,000,000

Land 20,000,000

Bank overdraft 1,400,000

Loans 1,800,000

Required:

a) Calculate the goodwill acquired by Cruz Limited (6 marks)

b) Explained the difference between inherent goodwill and purchased goodwill. Explain the accounting treatment for both