a. calculate the purchase considerationb. calculate the goodwill or bargain purchase forthis transactionc. Prepare the journal entries in the books ofChelsea Limited relating to this transactionPax Limited showed the following assets and liabilities in its financial statements at 31 December 2018.DETAILSPPEInventoryLong Term LoansAccount PayableCARRYING AMOUNT FAIR VALUE10,000,000 14,000,0004,200,000 4,400,000(3,500,000)(3,500,000)(2,500,000) (2,500,000)8,200,00012,400,0003.1. The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assetsand liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement ofthe acquisition.

When one company takes over another and establishes itself as the new owner, the purchase is called…

Answered: a. calculate the purchase consideration…

a. calculate the purchase consideration b. calculate the goodwill or bargain purchase for this transaction c. Prepare the journal entries in the books of Chelsea Limited relating to this transaction

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

a. calculate the purchase consideration
b. calculate the goodwill or bargain purchase for
this transaction
c. Prepare the journal entries in the books of
Chelsea Limited relating to this transaction
Pax Limited showed the following assets and liabilities in its financial statements at 31 December 2018.
DETAILS
PPE
Inventory
Long Term Loans
Account Payable
CARRYING AMOUNT FAIR VALUE
10,000,000 14,000,000
4,200,000 4,400,000
(3,500,000)
(3,500,000)
(2,500,000) (2,500,000)
8,200,000
12,400,000
3.1. The current market rate for similar transactions is 8.5% per annum. Chelsea Limited planned to acquire all the assets
and liabilities of Pax Limited on 1 July 2018 and agreed to pay R13,400,000 in cash on 1 July 2019 in full settlement of
the acquisition.

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