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On 1 January 20X6, Dargent Co acquired 75% of Latree Co’s equity shares by means of a share exchange of two shares in Dargent Co for every three Latree Co shares acquired. On that date, further consideration was also issued to the shareholders of Latree Co in the form of a $100 8% loan note for every 100 shares acquired in Latree Co. None of the purchase consideration, nor the outstanding interest on the loan notes at 31 March 20X6, has yet been recorded by Dargent Co. At the date of acquisition, the share price of Dargent Co and Latree Co is $3·20 and $1·80 respectively
Equity shares of $1 each 20,000I have calculated the share exchange consideration, 32000 but can’t seem to understand how to calculate 8% loan one.
So the Latree share capital was $20,000 $1 equity shares
Dargent acquires 75% = 15,000 shares and for every 100 shares acquired Dargent issues a $100 loan note
Value of loan note issued is therefore:
15,000 shares acquired / 100 (for every 100) * $100 loan note = $15,000 loan note
OK?
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