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Hi could you please explain to me
Chapter 9 ex 1 Ausra – Why do we add 12000 on inventory fair value and on the other side you less 12000.
On dividend in Ausra how do you get 12000 x 10 c
and 40000 x 2 x 3cThe 12,000 is the fair value adjustment in respect of inventory. If inventory is undervalued by 12,000 as at date of acquisition, and we adjust it, that means that the pre-acquisition profit will increase by 12,000.
But, at the same time, the increase of 12,000 will increase the opening inventory for the post-acquisition period and that, when adjusted, will reduce the post-acquisition profits.
The dividends are 120,000 x 10c (not 12,000 x 10c like you have written)
120,000 is the number of shares in Ausra AFTER accounting for the new shares issued on the acquisition of Danute
40,000 x 2 is the number of 50c nominal value shares in Danute
Ok now?
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