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Hi sir,
I have problems with dealing with the following question. Can you help me to sort it outOn 1 March 2011 P acquired 80% of S’ equity in a share exchange of 3 shares in P for every 2 shares in S. S has a total issued share capital of $8000 in $ 1 equity shares. The market price of P’s shares at the date of acquisition was $3 per share.
Calculate the cost of investment in S to be used in calculating goodwill.
Waiting for a reply
Surely you have an answer in the same book in which you found the question? (If not then you should be using a different book 🙂 )
You should use this forum to ask about problems you have understanding the printed answers, and not to request an answer to a test question!
P is issuing 3/2 x 8,000 = 12,000 shares.
Therefore the cost of the investment = 12,000 x $3 = $36,000
(In fact, share for share exchanges are not really relevant for F3. It is in Paper F7 that they really become relevant)
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