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Q: P acquired 64000 shares in S on 1 january Year 6 when the accumulated profits of S were $ 65000.The value for assets and liabilities in the statement of financial position of S represent fair value.The accounting policy of P is to measure non controlling interest NCI at their fair value method including some goodwill.
The statement of financial position of company parent P& its subsidiary S at 31dec year 6
parent P Sub S
property plant and equipm 620 000 120 000
invest in S 188 000
equity share of $0.5 each 100 000 40 000
Share premium 200 000 30 000
required what is the equity share and share premium of sub S at the acquisition date?the answer is $ 20 000 and $50 000 respectively but i do not understand how they get it?
You don’t understand how they get it? !!!!!
I don’t understand the question, let alone the answer!
I’m going to ask you to re-read the question and just confirm that you have copied it EXACTLY as it is written! IN FULL!
My instant reaction is that the equity share capital and the share premium of the subsidiary at the date of acquisition is $40,000 and $30,000 respectively
the statement of financial position of a parent company P and its subsisdiary S at December year 6 are as follows
Parent
non current asset :
property palnt and equipement $ 620000
investment in s $ 188000
Current assets $ 112000
equipty shares of $ 0.50 each $100000
Share premium $ 200000
accumulated profits $ 480000
bank loan $140000
subsidiary
non current asset :
property palnt and equipement $ 120000
Current assets $ 60000
equipty shares of $ 0.50 each $40000
Share premium $ 30000
accumulated profits $ 90000
bank loan $20000
P acqired 64000 shares in s on 1 january year 6 when the accumulated profits of S were $65000.The value for assets and liabilities in the statement of financial position of S represente fair values.
the accounting policy of P is to measure non controlling interest at their proportionate shares of the net assets of the subsidiary(and not to measure NCI by the fair method including some goodwill
A review of goodwill at 31 dec year 6 found that had been impaired and now valued at $50000.
Prepare a conslodated statement of financial position as at 31 dec year 6the statement of financial position of a parent company P and its subsisdiary S at December year 6 are as follows
Parent
non current asset :
property palnt and equipement $ 620000
investment in s $ 188000
Current assets $ 112000
equipty shares of $ 0.50 each $100000
Share premium $ 200000
accumulated profits $ 480000
bank loan $140000
subsidiary
non current asset :
property palnt and equipement $ 120000
Current assets $ 60000
equipty shares of $ 0.50 each $40000
Share premium $ 30000
accumulated profits $ 90000
bank loan $20000
P acqired 64000 shares in s on 1 january year 6 when the accumulated profits of S were $65000.The value for assets and liabilities in the statement of financial position of S represente fair values.
the accounting policy of P is to measure non controlling interest at their proportionate shares of the net assets of the subsidiary(and not to measure NCI by the fair method including some goodwill
A review of goodwill at 31 dec year 6 found that had been impaired and now valued at $50000.
Prepare a conslodated statement of financial position as at 31 dec year 6please Sir i want do not understant the amount of Equity share and premium for the sub.
Can you please help me???What is there not to understand?
When the subsidiary company was created (or possibly on the later occurrence of a share issue by the subsidiary) the promotors issued 80,000 shares with a nominal face value of 50 cents each and the company received 87.5cents per share
That meant that there were 80,000 equity shares in issue of 50 cents each, authorised, issued and fully paid.
In addition, the company had received cash of 80,000 x 87.5 cents per share ie cash of 70,000 ie an excess of cash of 30,000 when compared with the nominal value. That 30,000 is share premium.
What else is there not to understand?
my problem is how you get 87.5 cent per share.
From the question , i undersand that the sub company issued 80 000 shares but the parent company took only 64 000 shares from the 80 000 shares ?
I will be happy if you enlighten this little beat.Those 80,000 shares were issued by the subsidiary 832 years ago when the subsidiary was created. On that date of issue, the promotors asked themselves “How much can we ask the initial shareholders to pay for these new shares in our new company?” and one of them said “Let’s ask them for 87.5 cents each”
So that’s what they did – they invited all their friends and lots of neighbours to buy shares in this new company. And lots of them did!
So that’s where the share capital of 40,000 and the share premium of 30,000 come from – it all happened a long, long time ago.
And then! On 1 January, 2006 ….. what happened?
Along came a BIG company called P and P approached all our shareholders who are now over 850 years old and this P company said “Sell us your shares or we shall eat you all up” and the holders of 80% of our share capital believed this so agreed to sell their shares to BIG P
And that’s how P came to own 80% of company S
Ok now?
You’re very welcome
HOWEVER!!!
Your original post asked about share capital and share premium of the subsidiary at date of acquisition and your post pointed out that the relevant amounts were $20,000 and $50,000 respectively.
I said in my response that I couldn’t understand where these figures came from either ……. and I still can’t!
Can you throw some light on this?
Hello sir
Sorry for delaying to reply.
In fact i was trying to understand how they got the 20000 for shares capital and 50000 for shares premium in their answer.
Finaly i understand that they have made the mistake in the book
The share capital and premuim are the same at the acquisition and reporting date ie 40000 and 30000 respectively.Once again thanks for the support
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