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Sir have u explained anywhere in lectures the problem about Parent issuing some of its own shares in exchange for the shares in subsidiry?
I know u said in the Group Comprehensive example that there are exercise availbe on it in course notes but how can we learn it without lectures on it? i am not getting this topic how can i learn it?
Thank You
There is a worked example at the end of chapter 8 from a past examination example
Go through that s l o w l y and you should be able to follow through both that separate exercise but also then the others in the mini-exercises
I worked throught it but i dont understand share premium why did we value it at 5.50 and also at nominal at 1?
The deffered cash payment is easy. What about the nci in the end why are we valuing it?
And finaly i dont know there seems to be arithmetical error 6000 + 33000 + 14400+2500 is 55900
Why have u given the value of Greca 55500 ?
Ah! That value of $55,500 is, as you have correctly discovered, a misprint
When shares are issued by the acquirer on a takeover, the acquirer’s shares are (invariably) $1 par / face value
So when that acquirer issues new shares, we need to know the NUMBER of new shares issued
Say 5,000 shares of $1 each are issued at a value of $3,50
The double entry in the acquirer’s records must be:
Dr Cost of acquisition 5,000 x $3.50 = $17,500
Cr Share Capital 5,000 x $1 = $5,000
Cr Share Premium 5,000 x ($3.50 – $1.00) = $12,500OK?
“What about the nci in the end why are we valuing it?”
Because we need to have a value for the nci so that we can calculate the goodwill in working W2
Have a go now at some of the mini-exercises and see how you get on with those
H ltd acquired 60% of ordinary share capital of S ltd when retained earning amounted to $ 1000,40% of preference share capital and part of 10% loan
H ltd S ltd
Tangibe assets 50,000 40,000
investment in s:osc 12,000
pref sh.10,000
stock loan 5,000
Total 77,000 40,000current assets
inventory 12,000 10,000
receivables 8,000 4,000
bank 3,000 23,000 2,000 16,000
Total assets 100,000 56,000Equity
Osc 50,000 30,000
Preference share 10,000 12,000
Retained profit 20,000 4,000
Total 80,000 46,000Non current liabilities
10% loan stock 10,000 6,000Current liabilities
Payable 10,000 4,000
Total Equity & liability 100,000 56,000Required: consolidated statement of H ltd and it subsidiary S ltd as at Dec 2012
Thank you for this information
I have three questions for you:
1) why is this post of yours attached to a thread involving shares issued on an acquisition?
2) why is it not the start of a new thread?
3) what am I meant to do with this information?
I typed it well but when i loaded I saw mix up of details belonging to H ltd,the acquirer, and S ltd the subsidiary.the figures at the extreme right belongs to subsidiary.
I would like you to help me workout the big three I.e goodwill,NCI and consolidated reserves.
can I send my question via email?
“can I send my question via email?” – no because you don’t know my email address
I shall help you but I’m not prepared to do your homework for you
You show me your workings and I’ll identify where I believe that you are going wrong
I worked out the layout of the question and the difficulties (not your fault) of their appearance
You didn’t take the hint and put your posts on a separate thread
If you don’t open a new thread for this question with your workings for “the Big Three” then I shall not help
Subsidiary’s assets at:
Acquisition: ordinary share capital-30,000
Retained earning- 1,000
TOTAL 31,000Consolidation: Ordinary share capital-30,000
Retained Earning- 4,000
TOTAL 34,000GOODWILL:
Parent’s investment @ cost- 27,000
NCI’s at fair value at acquisition
40%30,000 12,000
Less: sun’s net asset @ fv @acq-(31,000)
Goodwill in csfp 8,000NCI
NCI @ fair value @ acquis- 12,000
NCI %tage of post acqui reserve
40%×(34,000-31,000) 1,200
NCI in csfp 13,200CONSOLIDATED RESERVES
Parent’s own reserve now 20,000
parent’s %tage of post acqu reser
60%×3,0000 1,800
Consolidated reserv in csfp 21,800This was in my last post
“If you don’t open a new thread for this question with your workings for “the Big Three” then I shall not help”
H Ltd
Non Current assets $ $
Tangible-PPE 50,000
Investment in S Ltd OSC 12,000
PSC 10,000
Loan stock 5,000 27,000
77,000
Current assets
Inventory 12,000
Receivables 8,000
Cash at bank 3,000 23,000
TOTAL ASSETS 100,000Equity and Liability
Share Capital OSC 50,000
PSC 10,000
Retained Profits 20,000
80,000
Non Current Liabilities
10% Loan Stock 10,000Current Liabilities
Account Payable 10,000
TOTAL EQUITY AND LIABILITY 100,000S Ltd
Non Current assets : $ $
Tangible-PPE 40,000
40,000
Current assets
Inventory 10,000
Account receivables 4,000
Cash at bank 2,000 16,000
TOTAL ASSET 56,000Equity and Liability
Share Capital OSC 30,000
PSC 12,000
Retained Profits 4,000
46,000Non Current Liabilities
10% Loan Stock 6,000Current Liabilities
Account Payable 4,000
TOTAL EQUITY AND LIABILITY 56,000Haji
I repeat what I have said in my previous 2 posts!
“If you don’t open a new thread for this question with your workings for “the Big Three” then I shall not help”
Before I can help you I need to know the date of acquisition, the basis of the valuation of the nci as at date of acquisition, probably the value of the S shares as at date of acquisition
Basically, you haven’t given me enough information
Now, one final time
Put the question onto a new thread!
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