The following are the statements of financial position at September 30, 2013, of Chrapaty Ltd. and Squid Ltd.
Additional information:
1. During September, the shares of the companies were selling on the stock exchange at or near the following prices:
2. On September 30, the directors of Chrapaty made an offer to the shareholders of Squid acquire their shares on the basis of one share at $1 in Chrapaty for every two shares at $1 in Squid. The offer was open for one month and was contingent upon being accepted by the holders of at least 75% of Squid’s capital.
3. Immediately after the announcement, Chrapaty’s shares rose in price on the stock exchange to $6.20 and the shares of Squid rose to $3. The shares of both companies stayed at or close to this price throughout October.
4. By the end of October, holders of 90% of Squid shares accepted the Chrapaty offer and Chrapaty proceeds to acquire these shares on the agreed basis.
5. By mid-November, Chrapaty shares dropped in price on the stock exchange to $5.50.
6. Costs of issuing and registering shares issued by Chrapaty amounted to $2,000.
(a) Give the journal entries necessary to record the transactions. (Show clearly to which company particular entries relate.)
(b) State briefly why you selected the value adopted in recording the acquisition, and whether you consider there is any acceptable alternative recording value.
(c) Show the statement of financial position of Chrapaty after the entries have been recorded.

  • CreatedJune 09, 2015
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