Chapter 8- illustration

Here’s an extract from the question (6th line, first bullet point)

‘at the date of acquisition, shares in Viagem and Greca had a stock market value of $6.50 and $2.50 each, respectively’

Do you see where $5.50 comes from or do you need more?

The Viagem shares have a face value of $1 each but they have a market value of $6.50

So when Viagem issues 6,000 new shares in its acquisition of Greca the double entry will be :

Dr Cost on Investment (6,000 x $6.50) 39,000
Cr Share Capital (6,000 x $1) 6,000
Cr Share Premium (6,000 x ($6.50 – $1)) $33,000

Better?

Good!