On 1 November 2020, Bermuda Ltd acquired all the assets and liabilities (other than cash)...
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Accounting
On 1 November 2020, Bermuda Ltd acquired all the assets and liabilities (other than cash) of Triangle Ltd. The details on the assets and liabilities of Triangle Ltd were as follows:
Carrying Amount
Fair Value
Cash
50,000
50,000
Equipment
130,000
140,000
Accounts Receivable
15,000
15,000
Furniture
25,000
20,000
Accounts Payable
20,000
20,000
Income tax Payable
9,000
9,000
Annual Leave Payable
4,000
4,000
In addition to the above items Triangle Ltd had an internally generated brand name with a fair value of $50,000 that was not recognised in its accounts. The consideration Bermuda Ltd paid to Triangle Ltd was $80,000 cash and 20,000 shares. The fair value of each Bermuda Ltd share is $7. Bermuda Ltd paid $20,000 in acquisition related costs. Tax rate is 30%.
Required:
Conduct an acquisition analysis for Bermuda:
1. Purchase Consideration
2. Net Identifiable Assets (Hint: E = A - L)
3. Business Combination Valuation Reserve
4. Goodwill/(Bargain Purchase)
Answer & Explanation
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