On 1 March 2023, JAN Ltd acquired a business from VAN Ltd for cash consideration of $275 000. The accounting records of VAN Ltd included the following assets and liabilities for the business prior to its sale.

	Book Value	Fair Value
Franchise agreement	$180 000	$220 000
Inventories	70 000	100 000
Provision for employee benefits	40 000	50 000
Net assets	$210 000	$270 000

JAN Ltd assumes responsibility for unrecognised contingent liability of VAN Ltd. The contingent liability relates to an unresolved claim from the franchisor regarding the operation of the franchising agreement. At the date of acquisition, the claim is assessed to have a fair value of $30 000. What is the journal entry of JAN Ltd to record the business combination?

2.

On 1 May 2023, NEIL Ltd sold a business to TH Ltd for agreed consideration of $600 000. The assets and liabilities transferred from NEIL Ltd to TH Ltd were as follows.

	Book Value	Fair Value
Customer Contracts	$0	$100 000
Inventories	300 000	350 000
Accounts receivable	240 000	220 000
Provision for employee benefits	100 000	100 000
Identifiable net assets	$440 000	$570 000

What is the journal entry of NEIL Ltd on 1 May 2023 if the company continues to exist after the sale of its business?

3.

When applying the acquisition method, which of the following would not be recognised by the acquirer?

	a.	a liability for costs the acquirer is obliged to incur as part of the business combination agreement
	b.	a liability for future costs the acquirer expects to incur on the business acquired.
	c.	a pre-existing liability for a payable due to the acquirer.
	d.	both a. and b. are correct.