Scruffy Ltd is a manufacturer of pet food and looking to take over the company Smuckos Ltd. Financial information of Smuckos Ltd at 1 December 2019 included the following:

Assets
Cash	$13,800
Trade receivables	46,800
Inventory	23,200
Plant	133,800
Accumulated depreciation - plant	(32,000)
Land	20,800
Total assets	206,400
Liabilities
Trade payables	24,800
Provisions	24,000
Loans	17,200
Total liabilities	66,000
Equity
Share capital - 60,000 ordinary shares	48,000
- 40,000 ordinary shares	32,000
Retained earnings	60,400
Total equity	140,400

All the assets and liabilities of Smuckos Ltd were recorded at amounts equal to fair value except as follows:

Plant	$112,000
Land	35,800
Inventory	28,000

Smuckos Ltd also had a brand Scuby Snacks that was not recorded by the company because it had been internally generated. It was valued at $10,000. Smuckos Ltd has also not recorded the interest accrued on the loans amounting to $22,800 and annual leave entitlements of $13,000.

Scruffy Ltd decided to acquire all the assets of Smuckos Ltd except for the cash. In exchange for these assets, Scruffy Ltd agreed to provide:

a) Two shares in Scruffy Ltd for every three A ordinary shares held in Smuckos Ltd. The fair value of each Scruffy Ltd share was agreed to be $2.16. b) Artworks to the owners of the B ordinary shares held in Smuckos Ltd. (These artworks were held in the records of Scruffy Ltd at $40,000 and valued at $58,000.

c) Sufficient additional cash to enable Smuckos Ltd to pay off its liabilities including the expected liquidation costs of $4,000.

The business combination occurred on 1 December 2019. Legal and accounting costs incurred by Scruffy Ltd in undertaking this business combination amounted to $800. Costs to issue the shares to the A ordinary shareholders of Smuckos Ltd were $400.

Required:

1. Prepare the acquisition analysis in relation to the acquisition to determine the gain on bargain purchase or goodwill. 2. Prepare the journal entries in the records of Scruffy Ltd to record its acquisition of Smuckos Ltd on 1 December 2019.