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At 1 January 20X8 Tom Co acquired 80% of the share capital of Jerry Co for $100,000. At that date the share capital of Jerry Co consisted of 50,000 equity shares of $1 each and its reserves were $30,000. At 31 December 20X9 the reserves of Tom Co and Jerry Co were as follows:
ined no as taken can also
Tom Co
$400,000
Jerry Co
$50,000
In the consolidated statement of financial position of Tom and its subsidiary Jerry at 31 December 20X9, what amount should appear for group reserves?
$400,000
$438,000
$416,000
$404,000
My question is why did we use $50000 share capital to calculate net asset at acquisition date not $100000 as tom acquired 80% share capital of jerry for 100000The total net assets of any company are always equal to the share capital plus reserves.
However I don’t know why you are interested in the net assets at the date of acquisition for being able to answer this question. It asks for the group reserves and they are the total of Tom’s reserves plus Tom’s share of Jerry’s post acquisition reserves.
Have you watched our free lectures on consolidations?
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