Taylor Ltd, a supplier of music records and equipment, agreed to acquire the business of a rival company, Speedy Ltd, taking over all assets and liabilities as at 1 June 2021.

The price agreed on was $175,000, payable $150,000 in cash and the balance by the issue to the selling company of 25,000 fully paid shares in Taylor Ltd, these shares having a fair value of $1.00 per share.

The trial balances of the two companies as at 1 June 2021 were as follows.

	Taylor		Speedy
	Dr	Cr	Dr	Cr
Share capital		1,200,000		300,000
Retained earnings		420,000	184,000
Accounts payable		97,000		325,000
Cash	275,000
Equipment (net)	468,000		230,000
Inventory	415,000		122,000
Accounts receivable	309,000		68,000
Borrowings	250,000
Goodwill			21,000
	1,717,000	1,717,000	625,000	625,000

All the identifiable net assets of Speedy Ltd were recorded by Speedy Ltd at fair value except for the inventories, which were considered to be worth $122,000 (assume no tax effect). The plant had an expected remaining life of 6 years.

The business combination was completed and Speedy Ltd went into liquidation. Taylor Ltd incurred incidental costs of $1,000 in relation to the acquisition. Costs of issuing shares in Taylor Ltd were $2,000.

Required

1. Calculate Goodwill and prepare the acquisition analysis for Taylor Limited (show calculations) (10 marks)
2. Prepare the journal entries in the records of Taylor Ltd to record the business combination. (10 marks)