A Limited acquired 100% of the share capital of B Limited for $765000. B Limited had total shareholder's equity of $400000. Thebook values of B Limited's assets were: buildings $100000, machinery $180000. The fair values of these assets were: buildings6290000. machinery $350000. The tax rate is 30%. The acqisition analysis wil determine goodwill or gain on bargain purchase

The acquisition analysis involves determining the fair value of the identifiable assets and liabilities of B Limited at the acquisition date.

Step 1: Determine the purchase consideration A Limited acquired 100% of B Limited for $765,000. This is the purchase consideration.

Step 2: Determine the book value of net assets The book value of B Limited's net assets is the total shareholders' equity, which is $400,000.

Step 3: Determine the fair value of net assets The fair value of B Limited's assets are: buildings $629,000 and machinery$350,000. So, the total fair value of assets is $979,000.

Step 4: Calculate the goodwill or gain on bargain purchase Goodwill is calculated as the excess of the purchase consideration over the fair value of the net assets. If the fair value of the net assets is greater than the purchase consideration, then there is a gain on bargain purchase.

In this case, the purchase consideration ($765,000) is less than the fair value of the net assets ($979,000). Therefore, there is a gain on bargain purchase of $214,000 ($979,000 - $765,000).

Step 5: Adjust for deferred tax The difference between the fair value and the book value of the assets will result in a deferred tax liability. The difference for buildings is $529,000 ($629,000 - $100,000) and for machinery is$170,000 ($350,000 -$180,000). The total difference is $699,000. The deferred tax liability is 30$209,700.

Step 6: Adjust the gain on bargain purchase for the deferred tax liability The final gain on bargain purchase is $214,000 (from step 4) minus the deferred tax liability of$209,700, which is $4,300.