1. King Fern Ltd reported an equity interest of 30%, which it acquired three years ago, at $850,000 on its balance sheet on 30 June 2022. King Fern acquired another 45% shares in Silver Fern Ltd for $1,900,000 cash on 30 June 2022. The remaining 25% shares in Silver Fern Ltd had a fair value of $1,000,000 on 30 June 2022. The balance sheets of King Fern Ltd and Silver Fern Ltd as at 30 June 2022 were as follows:

	King Fern Ltd ($000)	Silver Fern Ltd ($000)
Assets
Current Assets
Cash	8,000	100
Accounts Receivable	2,500	400
Non-current assets
Investment in Silver Fern	850
Equipment	10,000	1,000
Land	20,000	3,000
Total assets	41,350	4,500
Liabilities and equity
Current Liabilities
Accounts Payable	3,500	500
Non-current liabilities
Loans	6,000	1,000
Total liabilities	9,500	1,500
Equity
Share capital	25,850	2,500
Retained earnings	6,000	500
Total equity	31,850	3,000
Total liabilities and equity	41,350	4,500

All the assets and liabilities of Silver Fern Ltd that are on the balance sheet are at fair value except for Investment in Silver Fern, Equipment and Land. The Investment in Silver Fern had a fair value of $1,200,000 on the balance date. Equipment and Land had fair values of $1,200,000 and $3,500,000, respectively, on the balance date.

Both King Fern and Silver Fern are gaming companies. Silver Fern has a huge customer base and King Fern acquired Silver Fern to have instant access to this customer base and the market. King Fern estimated that the Customer Intangible asset, which does not appear on the books of Silver Fern, had a fair value of $500,000 at the date of the balance sheet. Tax rate is 28%. The balance date is 30 June for both King Fern Ltd and Silver Fern Ltd. King Fern Ltd uses the full goodwill method. After the acquisition, Silver Fern maintained its independent legal status, maintained its own books of accounts, and prepared its own financial statements.

Required

1. Provide the journal entry in the books of King Fern Ltd to record the acquisition of 45% shares in Silver Fern on 30 June 2022. (2 Marks)

Answer: Journal entry
	Dr/Cr	Debit amount ($000)	Credit amount ($000)

1. Calculate the fair value of net identifiable assets of Silver Fern Ltd on 30 June 2022. (4 Marks)

Answer: The fair value of net identifiable assets of Silver Fern Ltd on 30 June 2015.
		Fair value ($000)	Amount ($000)
Assets
Total assets
Liabilities
Total liabilities
Fair value of net identifiable assets acquired

1. Give the consolidation adjustment entry to update the carrying amount of the pre-acquisition interest in Silver Fern to fair valuefor preparing the consolidated financial statements on 30 June 2022. (2 Marks)

	Dr/Cr	Debit amount ($000)	Credit amount ($000)

1. Calculate the goodwill/gain on bargain purchase, if any, arising in this acquisition. (3 Marks)

Answer: Goodwill/gain on bargain purchase, if any, under the full goodwill method
	Amount ($000)

1. Give the business combination valuation entries for preparing the consolidated financial statements on 30 June 2022. (6 Marks)

Answer: Business combination valuation entries
	Dr/Cr	Debit amount ($000)	Credit amount ($000)

1. Give the pre-acquisition consolidation entry on 30 June 2022. (3 Marks)

Answer: Pre-acquisition entry
	Dr/Cr	Debit amount ($000)	Credit amount ($000)