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Consolidations (share exchange)

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Consolidations (share exchange)

  • This topic has 3 replies, 3 voices, and was last updated 7 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • October 16, 2015 at 10:49 am #276630
    anniebabe
    Participant
    • Topics: 33
    • Replies: 102
    • ☆☆

    Hello I am working through Kaplan text, page 460/461
    Test your understanding 3 – Cost of Investment

    P acquired 60% of S on 1 July 20X7 when the retained earnings of S were $5800. P paid $5000 in cash. P also issued 2 $1 shares for every 5 acquired in S and agreed to pay a further $2000 in 3 years time.
    The market value of Ps shares at 1 July 20X7 was $1.80. P has only recorded the cash paid in respect of the investment in S. Current interest rates are 6%
    The P group uses the fair value method to value the nci. At the date of acquisition the FV of the nci was $5750.

    My question is this :-

    It is my understanding that Share Capital/Premium was only – ever of the parent but in the answer they have added another figure to the SC/SP
    I am presuming this is to do with the 2/5 issue, but confused how they have worked it out.
    The Share Capital figure in the question is $6000 (P) and $5000 (S) Share Premium $4000 (P).
    the answer consolidation says Share capital is (6000+1200) and Share premium is (4000+960)
    Sorry if this is a silly question, but I have had a block with this, if anyone can answer.
    Thank you.

    October 16, 2015 at 11:37 am #276633
    anniebabe
    Participant
    • Topics: 33
    • Replies: 102
    • ☆☆

    Right I have worked out the calculation
    5000 x 2/5 x 60% = 1200

    Share Capital 1200
    Share Premium 1200 x 0.80 = 960

    But not totally sure why I have done it
    Can anyone explain
    Bit confused with the share exchanges

    Thanks

    October 16, 2015 at 4:15 pm #276686
    submeyar
    Member
    • Topics: 3
    • Replies: 2
    • ☆

    Good Luck

    October 17, 2015 at 12:15 pm #276797
    MikeLittle
    Keymaster
    • Topics: 26
    • Replies: 22702
    • ☆☆☆☆☆

    Annie, ask this on the Ask the Tutor page and I’ll answer it

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