Exercise 28.4

Undervalued and unrecorded assets, unrecorded liabilities

On 1 July 2024, Belka Ltd acquired all the issued shares of Nungatta Ltd for a cash consideration of $1 200 000. At that date, the financial statements of Nungatta Ltd showed the following information.

Share capital	$800 000
General reserve	50 000
Retained earnings	300 000

All the assets and liabilities of Nungatta Ltd were recorded at amounts equal to their fair values at the acquisition date, except some equipment recorded at $30 000 below its fair value with a related accumulated depreciation of $80 000. Also, Belka Ltd identified at acquisition date a contingent liability related to a lawsuit where Nungatta Ltd was sued by a former supplier and attached a fair value of $20 000 to that liability.

Required

1. Prepare the acquisition analysis at 1 July 2024. just explain it because I am not see there is any tax rate in the Qs but the answer use 1-30%

1. Acquisition analysis at 1 July 2024:

Net fair value of identifiable assets

and liabilities acquired = ($800 000 + $50 000 + $300 000) (equity)

+ $30 000 x (1 30%) (BCVR equipment)

- $20 000 x (1 30%) (BCVR cont. liability)

= $1 157 000

Consideration transferred = $1 200 000

Goodwill = $1 200 000 $1 157 000

= $43 000