On 1 July 2020, Big Ltd acquired all the issued share capital of Small Ltd for cash for an amount of $1,050,000. On the date of the acquisition, the statements of the financial position of both entities are as follows:

	Big Ltd ($)	Small Ltd ($)
Assets
Cash	21,000	10,500
Accounts receivable	315,000	115,500
Land	420,000	210,000
Plant	1,680,000	1,050,000
Investment in Small Ltd	1,050,000
	3,486,000	1,386,000
Liabilities
Accounts payable	126,000	63,000
Loans payable	840,000	315,000
Shareholders equity
Share capital	2,100,000	420,000
Retained earnings	420,000	588,000
	3,486,000	1,386,000

Required:

a) Calculate the goodwill on acquisition assuming all net assets of small Ltd are recorded in fair value. (5marks)

ANSWER a):

b) Prepare consolidation journal entries. (2 marks)

ANSWER b):

c) What journal entry would the parent company Big Ltd record in its own accounting record for the acquisition of Small Ltd at the acquisition date?(1 mark)

ANSWER c):