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Plank acquired sixty per cent of the issued equity share capital of Splinter on 1 January
20X2. On that date, Plank paid $3 cash per share acquired and also issued two shares
(nominal value $1 per share) in exchange for each Splinter share acquired. At the date of
acquisition, Splinter had ten million equity shares of $1 nominal value in issue, plus a share
premium account balance of $10 million and had retained earnings of $50 million. The fair
value of the non-controlling interest in Splinter at the date of acquisition was $14 million.
The fair value of an equity share in Plank and Splinter were $4.50 and $1.50 respectively at
1 January 20X2.
What was goodwill on acquisition of Splinter for inclusion in the consolidated financial
statements of Plank for the year ended 31 December 20X2?is this type of q in the sylabbus?
It is a bit unclear as to whether or not consideration in the form of cash plus shares is in the syllabus for F3 or not (it certainly is for later exams).
However it is easily deal with anyway. Plant bought 60% x 10M = 6M shares.
They paid cash of 6M x $3 = $18M, and in addition gave 2 x 6M = 12M shares which were worth 12M x $4.50 = $54M.
So total consideration = 18 + 54 = $72M.Everything else in the question is, of course, certainly examinable and is explained in full in my free lectures.
thank you so much! makes alot of sense now 🙂
also, when adding the Net Assets , we will include the Share premium a/c?
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