Forum Replies Created
- Posts
Thanks Mike.
what does you mean by marketable commodities. Co. all inventory are marketable…
What are the exception in IAS 2 specifically for using Replacement cost to value Inventory….
@rahee but we must take the project and only use the remaining 5000 on the other project.
Q in which wacc was required the cost of debt was 4.4% the ke was 10.3 and the mv of equity was 75 and mv of debt was 15 which gives WACC 9.32 %. and if we assume that the Mv of the debt of target co is after tax it would gives us project specific cost of equity = 12. some thing …
@pringo Time was enough if you know how and what to do. yeh practice was important…..
Got NPV AROUND negative (23000) .total no . of new shares are 2500 (9400/4.7*.80) which gives total no of shares to 14500. total market value of equity 65800 (56400+9400). and terp $4.54 is it right
Q 4 was tricky but q1, q2 was too easy Forgot EPS and q5 was ok but out of time only 80% of Q3 completed
Thanks Mike… while calculating the Valuation of Associate could we deduct the dividend received from associate from investment +share of post-acq profit..
Thanks for reply but when pv of lease payment is less than the cash price what will do?
extracts…..
In recent years Hillusion has acquired a reputation for buying modestly performing
businesses and selling them at a substantial profit within a period of two to three years
of their acquisition. On 1 July 2011 Hillusion acquired 80% of the ordinary share capital
of Skeptik at a cost of $10,280,000. On the same date it also acquired 50% of Skeptik
10% loan notes at par. The summarised draft financial statements of both companies
are:
Income statements: Year to 31 March 2012
Hillusion Skeptik
$000 $000Loan interest received (paid) 75 (200)
Profit before tax 12,075 3,600
Taxation (3,000) (600)
Profit for the year 9,075 3,000Retained earnings brought forward 16,525 5,400
Retained earnings per balance sheet 25,600 8,400
Statements of financial position: as at 31 March 2012
Hillusion Skeptik
$000 $000Equity and liabilities
Ordinary shares of $1 each 10,000 2,000
Retained earnings 25,600 8,400The following information is relevant:
(i) The fair values of Skeptik assets were equal to their carrying values (book values)
with the exception of its plant, which had a fair value of $3.2 million in excess of
its carrying value at the date of acquisition. The remaining life of all of Skeptik’s
plant at the date of its acquisition was four years and this period has not changed
as a result of the acquisition. Depreciation of plant is on a straight-line basis and
charged to cost of sales. Skeptik has not adjusted the value of its plant as a result
of the fair value exercise.
(ii) In the post acquisition period Hillusion sold goods to Skeptik at a price of $12
million. These goods had cost Hillusion $9 million. During the year Skeptik had
sold $10 million (at cost to Skeptik) of these goods for $15 million.(iii) Hillusion bears almost all of the administration costs incurred on behalf of the
group (invoicing, credit control, etc). It does not charge Skeptik for this service as
to do so would not have a material effect on the group profit.
(iv) Revenues and profits should be deemed to accrue evenly throughout the year.
(v) The current accounts of the two companies were reconciled at the year-end with
Skeptik owing Hillusion $750,000.
(vi) It is the accounting policy of Hillusion that the non-controlling interests in its
subsidiary should be valued at a proportionate share of net assets.
.
Required:
(a) Prepare a consolidated income statement and consolidated statement of financial
position for Hillusion for the year to 31 March 2012. (20 marks)