Question 2: Business Combinations (Chapter 3) - 15 marks

Manna Ltd. enters into a business combination with Noah Inc. in which Manna purchases all of the identifiable assets and liabilities of Noah Inc. To effect the business combination, Manna issued 50,000 of its common shares currently trading at $8.00 per share for all of Noah's net identifiable assets. Manna is considered to be the clear acquirer. Costs associated with the business combination are:

Legal, appraisal, and finders' fees	$5,000
Costs of issuing shares	7,000
	$12,000

Balance sheet data for the two companies immediately before the business combination are below:

	Manna Ltd. Book Value	Noah Inc. Book Value Fair Value
Cash	$ 140,000	$ 52,500	$ 52,500
Accounts Receivable	167,200	61,450	56,200
Inventory	374,120	110,110	134,220
Land	425,000	75,000	210,000
Buildings (at net)	250,505	21,020	24,020
Equipment (at net)	78,945	17,705	15,945
Total Assets	$1,435,770	$337,785
Current Liabilities	$ 133,335	$ 41,115	$ 41,115
Non-current Liabilities	------------	150,000	155,000
Common Shares	500,000	100,000
Retained Earnings	802,435	46,670
Total Liabilities and Shareholders' Equity	$1,435,770	$337,785

Required:

• Calculate any goodwill created at the time of the business combination. (3 marks)
• Prepare the journal entries on Manna's books to record the business combination. (8 marks)
• Prepare Manna's balance sheet immediately after the business combination. Use an appropriate three line title. (4 marks)