On 1/07/2022, Kit Kat limited acquired all the shares in Mars Litd, the shares came with the dividend attached (cum. div). Mars had recorded a $500,000 dividen payable liability. The consideration paid by Kit Kat was $6,400,000. Equity at that date is:Share capital: $3,000,000General reserve: $635,000Retained earnings: $1,800,000All assets were recorded at fair value except for the following in the Carrying amountFair valueInventory$620,000$643,000Land$1,800,000$2,000,000Plant (accum. deon of $1,750,000)$3,250,000$3,575,000Patent$740,000$615,000Kit Kat recognised a brand with a value of $220,000 for Mars.The patent had accumulated amortidation of $740,000 with a remaining useful life of 8 years at acquisition.1) Determine the gain on bargain purchase or goodwill as at acquisition date.

Given in the question: Shareholders Equity Share Capital $30,00,000.00 General…

Answered: Determine the gain on bargain purchase…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter15: Contributed Capital

Section: Chapter Questions

Problem 1MC

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On 1/07/2022, Kit Kat limited acquired all the shares in Mars Litd, the shares came with the dividend attached (cum. div). Mars had recorded a $500,000 dividen payable liability. The consideration paid by Kit Kat was $6,400,000. Equity at that date is:

Share capital: $3,000,000

General reserve: $635,000

Retained earnings: $1,800,000

All assets were recorded at fair value except for the following in the

	Carrying amount	Fair value
Inventory	$620,000	$643,000
Land	$1,800,000	$2,000,000
Plant (accum. deon of $1,750,000)	$3,250,000	$3,575,000
Patent	$740,000	$615,000

Kit Kat recognised a brand with a value of $220,000 for Mars.

The patent had accumulated amortidation of $740,000 with a remaining useful life of 8 years at acquisition.

1) Determine the gain on bargain purchase or goodwill as at acquisition date.

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