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IFRS3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › IFRS3

  • This topic has 2 replies, 2 voices, and was last updated 3 months ago by victoriamapfumobn0.
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    Posts
  • February 21, 2022 at 11:41 am #649059
    victoriamapfumobn0
    • Topics: 3
    • Replies: 3
    • ☆

    CABBAGE Itd is a ZSE limited listed company that grows and distributes vegetables. On 1 January 2019 CABBAGE Itd acquired the TOMATO division of ABC Ltd. The main reason for this acquisition was so that CABBAGE ltd could get access to a supply contract between the TOMATO division and Veg & Fruit Ltd, a national greengrocer. The purchase consideration consisted of an immediate cash payment of $260 000 and an additional cash payment of $150 000 payable on 1 January 2020. The TOMATO division constitutes a business and CABBAGE ltd obtained control over the business from 1 January 2019 in terms of IFRS 10 Consolidated Financial Statements.

    The assets and liabilities of the tomato division on the acquisition date were as follows:

    Fair value C.A

    Dr/(Cr) S Dr/(Cr) S

    Assets 380,000 400,000

    Liabilities (130,000) (110,000)

    The supply contract between the TOMATO division and Veg & Fruit Ltd had a fair value of $80 000 on 1 January 2019 and the contract will expire on 1 March 2021. The TOMATO division did not recognise an asset in its accounting records in respect of the contract.

    The following information is also available:

    1. Assume a market related pre-tax interest rate of 12% per annum, compounded annually. 2. Assume a normal income tax rate of 28% and a capital gains tax inclusion rate of 80%. Ignore Value Added Tax (VAT) and Dividend Tax.

    Required:

    a) Discuss, with reference to amounts, how the purchase transaction of the TOMATO division should be accounted for on 1 January 2019 in the Separate Accounting Records

    of CABBAGE htd. [20 Marks] NB: Round off all amounts to the nearest S; comparative figures are not required: notes are not required; show all workings complying with IFRS.

    February 24, 2022 at 9:13 am #649244
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 6115
    • ☆☆☆☆☆

    Hi,

    You appear to have just copied out a question in your post. What do you want advice on? I’m not here to just answer it in full for you, you need to have made an attempt at it first letting me know where you have been struggling. I’ll then help you out.

    Thanks

    March 3, 2022 at 7:31 am #649702
    victoriamapfumobn0
    • Topics: 3
    • Replies: 3
    • ☆

    how do I calculate % of interest acquired and how do I go about calculating interest tax and capital gains tax

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