Leather Limited acquired 100% of the share capital of Vinyl Limited for $235 000. Vinyl had total shareholder's equity of $200 000. The book values of Vinyl Limited's assets were: buildings $150 000, machinery $80 000. The fair values of these assets were: buildings $180 000, machinery $90 000. Also, Vinyl Limited has not previously recorded an internally generated trademark with a fair value of $40 000 and a contingent liability related to a warranty with a fair value of $10 000. The tax rate is 30%. The acquisition analysis will determine:

A) a goodwill of $35 000.
B) a goodwill of $14 000.
C) a gain on bargain purchase of $21 000.
D) a gain on bargain purchase of $14 000.

Shareholder's Equity

The residual interest in the assets of a corporation after deducting liabilities, often represented by stock capital and retained earnings.

Internally Generated Trademark

A trademark that has been developed through the internal efforts of a company, not acquired or purchased from a third party.

Contingent Liability

(a) A possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufficient reliability.