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Hello John,
This question is puzzling me. Calculate the following figures that would be included in Gold Co’s consolidated statement of financial position at 31 December 20X5:
A. Share Capital
B. Share PremiumThese are the answers
Share capital (600,000 x $1) + (3 x $1 x 70,000) = $810,000
Share premium $150,000 + (3 x $1 x 70,000) = $360,000
Why are they they adding $210,000? Shouldn’t it just be the share capital and premium from the Parent Company?Gold Co acquired 70% of the share capital of Silver Co on 1 July 20X5. The consideration was a cash payment of $4 and three $1 shares in Gold Co, worth $2 each, for each share in Silver Co. Both companies have an accounting year-end of 31 December.
On 1 July prior to the acquisition, Gold Co had issued share capital of 600,000 $1 shares and a share premium account of $150,000. Gold Co’s retained earnings as at 1 January 20X5 were $850,000 and its retained profits for the year ended 31 December 20X5 were $540,000.
At 1 January 20X5 Silver Co had issued share capital of 100,000 50p shares and retained earnings of $610,000. Silver Co did not issue any shares between 1 January and 1 July 20X5.During the year ended 31 December 20X5 Silver made a profit of $240,000, which accrued evenly over the year. The fair value of the non-controlling interest at 1 July 20X5 was $190,000.
There were no intra-group transactions during the year ended 31 December 20X5.
Gold bought 70% of Silver’s shares. So they bought 70,000 shares.
As part of the consideration they issued new shares in Gold. So Gold issued 3 x 70,000 = 210,000 new shares in Gold.
The nominal value of these shares was $1 and so the share capital of Gold increased by $210,000 to a total of $810,000.The value of these shares was $2 each and so $1 of it is share premium. So with 210,000 new shares being issued, the share premium of Gold increased by $210,000 to a total of $360,000.
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