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I do not quiet understand how the pre and post acquisition profits were apportioned in the question 37 pendatic (12/08) of yhe BBP revision kit. Please explain in detail.
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(W-2)Net assets of subsidiary at fair value represented by Share capital and Reserves:
At Acquisition B/S date
Share Capital 4,000 4,000
Reserves 5,000(W-a) 6,500
Fair value adjustment:
–Plant 2,000 2,000
Less:depreciation(2m/5yrs*6/12) (200)
Less:Unrealized profit (800)
11,000
11,500
Difference is Post acquisition reserves i.e 500
(W-a)
at y/e reserves were 6,500
during the year they were 1,500(3000*6/12 as subsidiary was acquired during a year so time apportioned)
the difference between y/e reserves and during the year—5,000(6,500-1,500) would be reserves at acquisition date….IF u still have any queries u can ask me without any hesitation….
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