Ebony (Pty) Ltd (Ebony) is a producer of raw materials for the wood industry. In recent years it has been seeking to acquire a company that manufactures wooden furniture. To this end it acquired 80% of the shares of Ivory (Pty) Ltd (Ivory) on 30 September 2014 (acquisition date as defined and also the current financial year-end). The Non-controlling interest is measured at their proportionate share of the net asset value of the subsidiary. At the acquisition date Ebony assessed the fair values of Ivory's identifiable assets and liabilities. The details of that assessment are as follow: Assets 0 Property, plant and equipment comprises of: buildings with a cost of R5 000 000. The buildings are depreciated at 5% per annum on a straight line basis and were acquired by Ivory on 1 January 2012. At 30 September 2014, the valuator was unable to determine the fair value of the buildings. equipment with a fair value of Ri 700 000. Ebony has indicated that it has no use for this equipment in the group. Ivory has therefore undertaken to sell the equipment to a 0 third party. 0 0 Current assets comprise of: cash of R270 000; inventories with a cost of R850 000 (net realisable value R500 000); and trade receivables of R225 000 (after provision for doubtful debts of 15% of the carrying amount). 0 . Ivory developed a catalogue of modern furniture designs that gives them a significant advantage over their competitors. Ivory incurred expenses of R500 000 relating to the development of the catalogue, however its fair value cannot be determined reliably. Liabilities . . As part of the business combination, Ebony plans to restructure some of Ivory's operations. The cost of the restructuring is estimated to be R100 000. Current liabilities are made up of trade creditors of R475 000 and a short term portion of a loan of R100 000 (20% of the loan). The remainder of the loan is disclosed under long term liabilities in the Statement of Financial Position. One of Ivory's competitors, Cherry (Pty) Ltd (Cherry) has instituted legal action against them. Cherry claims that Ivory is engaged in unfair competition practices and is seeking damages amounting to R5 000 000. Ivory's legal council is of the opinion that there is a 30% probability that Ivory could lose the case. . PURCHASE CONSIDERATION In terms of the purchase agreement, the consideration due for the acquisition of Ivory is as follows: . Cash of R8 000 000 payable at acquisition. An additional amount of R2 000 000 should Ivory meet certain cash flow targets. Ebony has determined that it is probable that these targets will be met and this additional payment is due in three year's time. In addition to the consideration paid, Ebony also incurred the following costs: o legal fees in respect of purchase agreement of R20 000; valuation fees in respect of the valuation of assets and liabilities at the acquisition date of R15 000; and function to celebrate acquisition R13 500. The applicable discount rate is 7% per annum. o 0 . YOU ARE REQUIRED TO: 1) Calculate the net asset value of Ivory (Pty) Ltd at the acquisition date and split the net asset value between the parent and the NCI portions. You have to list all the assets and liabilities and indicate the measurement value even if it is RO. (17 marks) 2) Calculate the amount of goodwill that arose from Ebony (Pty) Ltd's acquisition of Ivory (Pty) Ltd. You have to list all the purchase consideration items and indicate the measurement value even if it is RO (10 marks) Ignore taxation