Question
Mervax Ltd acquired all assets and liabilities of Honsoon Ltd on 30 June 2020. The carrying amount and fair value of assets and liabilities taken
Mervax Ltd acquired all assets and liabilities of Honsoon Ltd on 30 June 2020. The carrying amount and fair value of assets and liabilities taken over are as follows:
| Carrying amount ($) | Fair value ($) |
Assets |
|
|
Cash | 15,000 | 15,000 |
Accounts Receivables (Net) | 900,000 | 950,000 |
Inventory | 1,000,000 | 1,200,000 |
Property, Plant and Equipment (Net) | 4,000,000 | 6,000,000 |
Liabilities |
|
|
Accounts payable | 200,000 | 200,000 |
Provision for employee benefits | 100,000 | 100,000 |
In addition, due diligence identified the existence of a brand names that was valued by an expert at $120,000. The due diligence process also uncovered contingent liabilities (Guarantee Payable) that were measured at $40,000.
The consideration paid was $7,500,000.
Record the journal entries for Mervax Ltd at acquisition date
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