On 1 January 2020, King Ltd acquired 75% of the share capital of King Ltd (cum. Div.) byproviding the following considerations:

• Cash paid $100,000.
• Cash of $600,000 is due on 1 January 2021. The incremental borrowing rate for Tee Ltd is 10%.
• The internally generated fair value of the patent was $40,000.
• 55,000 shares were issued at $3.50 per share.
• Due toconcerns about whether the share price will fall below $3.50, Tee Ltd provides a guarantee and pays $1,100.

Legal fees, cost of the share issue, and other costs associated with the acquisition were $6,500.

On that date, share capital and reserves, assets,and liabilities of King Ltd were as follows:

Sharecapital$550,000

Generalreserve$130,000

Retainedearnings$155,000

Carrying amount($)Fair value ($)

Inventory130,000155,000

Land200,000230,000

At the acquisition date, the liabilities of King Ltd included a dividend payable of $12,000. All assets of King Ltd were recorded at fair value, except for inventory and land. An analysis identifies an unrecorded internally generated trademark considered to have a fair value of $40,000. King Ltd is currently being sued by a previous customer. The expected damage with regards to the fair value is $45,000. Lawyers estimate that there is a 15% chance of losing the case. This contingent liability is not included previously in the calculation of liabilities.

The fair value of a non-controlling interest is $270,000 on 1 January 2020.

(Note: The tax rate is 30% and thefull goodwill method is used).

Required:

1. Calculate the consideration transferred.
2. Calculate the fair value of net assets acquired.
3. Calculate goodwill or gain on bargain purchase on the acquisition date.
4. Provide business combination valuation entries and pre-acquisition entries on 1 January 2019.