Company A and Company B are in power business. Company A holds 25% of equity shares...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Company A and Company B are in power business. Company A holds 25% of equity shares of Company B. On November 1, Company A obtains control of Company B when it acquires a further 65% of Company B's shares, thereby resulting in a total holding of 90%. The acquisition had the following features: ♦ ♦ Consideration: Company transfers cash of Rs. 59,00,000 and issues 1,00,000 shares November 1. The market price of Company A's shares on the date of issue is Rs. 10 per share The equity shares issued as per this transaction will comprise 5% of the post-acquisition equity capital of Company A. Contingent consideration: Company A agrees to pay additional consideration of Rs. 7,00,000 if the cumulative profits of Company B exceed Rs. 70,00,000 over the next two years. At the acquisition date, it is not considered probable that the extra consideration will be paid. The fair value of the contingent consideration is determined to be Rs. 3,00,000 at the acquisition date. Transaction costs: Company A pays acquisition-related costs of Rs. 1,00,000. Non-controlling interests (NCI): The fair value of the NCI is determined to be Rs. 7,50,000 at the acquisition date based on market prices. Company A elects to measure non-controlling interest at fair value for this transaction. Previously held non-controlling equity interest: Company A has owned 25% of the shares in Company B for several years. At November 1, the investment is included in Company A's consolidated statement of financial position at Rs. 6,00,000, accounted for using the equity method; the fair value is Rs. 20,00,000. The fair value of Company B's net identifiable assets at November 1 is Rs. 60,00,000, determined in accordance with Ind AS 103. Required: Determine the accounting under acquisition method for the business combination by Company A. Company A and Company B are in power business. Company A holds 25% of equity shares of Company B. On November 1, Company A obtains control of Company B when it acquires a further 65% of Company B's shares, thereby resulting in a total holding of 90%. The acquisition had the following features: ♦ ♦ Consideration: Company transfers cash of Rs. 59,00,000 and issues 1,00,000 shares November 1. The market price of Company A's shares on the date of issue is Rs. 10 per share The equity shares issued as per this transaction will comprise 5% of the post-acquisition equity capital of Company A. Contingent consideration: Company A agrees to pay additional consideration of Rs. 7,00,000 if the cumulative profits of Company B exceed Rs. 70,00,000 over the next two years. At the acquisition date, it is not considered probable that the extra consideration will be paid. The fair value of the contingent consideration is determined to be Rs. 3,00,000 at the acquisition date. Transaction costs: Company A pays acquisition-related costs of Rs. 1,00,000. Non-controlling interests (NCI): The fair value of the NCI is determined to be Rs. 7,50,000 at the acquisition date based on market prices. Company A elects to measure non-controlling interest at fair value for this transaction. Previously held non-controlling equity interest: Company A has owned 25% of the shares in Company B for several years. At November 1, the investment is included in Company A's consolidated statement of financial position at Rs. 6,00,000, accounted for using the equity method; the fair value is Rs. 20,00,000. The fair value of Company B's net identifiable assets at November 1 is Rs. 60,00,000, determined in accordance with Ind AS 103. Required: Determine the accounting under acquisition method for the business combination by Company A.
Expert Answer:
Answer rating: 100% (QA)
Purchase consideration Cash 5900000 Equity share 1000000 100000 share 10 Fair value of 300000 Contig... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Company A and Company B are both selling $2.5 million worth of goods. Company As PV ratio is 0.40 while Bs is 0.60. Company Bs fixed costs are $1 million, which puts the business at a competitive...
-
Company A and Company B both start 2012 with $1 million of shareholders equity and 100,000 shares of common stock outstanding. During 2012, both companies earn net income of $100,000, a return of 10%...
-
Company A and Company B enter into an agreement where Company A, the carrying party, will drill a well to a specified depth on Bs lease. Company A will have 100 percent of the working interest until...
-
State the issues presented to the Court in McCord v. McCord .
-
Sakarya Company reported retained earnings at December 31, 2010, of TL310,000. Sakarya had 200,000 ordinary shares outstanding throughout 2011. The following transactions occurred during 2011. 1. An...
-
DYI Construction Co. is considering a new inventory system that will cost $750,000. The system is expected to generate positive cash flows over the next four years in the amounts of $350,000 in year...
-
Under the assumptions of the linear model, the vertical spread in a residual plot will be about the same across the plot. In Exercises 9 and 10, determine whether the statement is true or false. If...
-
Presented below are the financial statements of Rajesh Company Ltd. RAJESH COMPANY LTD. Income Statement For the Year Ended December 31, 2017 Sales...
-
[9] Landon, a sole proprietor, made the following loans during the year. Two loans were closely related to his business operation, and the other two were personal. Unrecoverable Debt Written Off To...
-
Joey, a public limited company, operates in the media sector. Joey has investments in two companies. The draft statements of financial position at 30 November 20X4 are as follows: The following...
-
Irene and Fred Buckley are age 63 and 66respectively. They have various pensionentitlements and assets. They figure they needabout $45,000 per year after-tax for their lifestyleexpenditures.They want...
-
What criteria must be satisfied for a random variable X to be a hypergeometric random variable?
-
Determine whether the probability experiment represents a binomial experiment. If not, explain why. (a) An urn contains 20 colored golf balls: 8 white, 6 red, 4 blue, and 2 yellow. A child is allowed...
-
(a) Identify the four factors which cause non-current assets to depreciate. (b) Which one of these factors is the most important for each of the following assets? (1) a gold mine (2) a van {3) a...
-
In your own words, explain the logic behind Formula (1). Formula 1 P(x) = (C) (N-KCn-x) NCn (1)
-
In Michigans Classic Lotto 47 Lottery, a player must choose six numbers between 1 and 47, inclusive. Six balls numbered from 1 to 47 are then randomly selected from an urn. The random variable X...
-
A gas occupies a volume of 5.0 liters at a pressure of 3.0 atm. What would the new pressure be if the volume of the gas increases to 6.0 L at constant temperature? O a. 2.5 atm O b.0.5 atm Oc3.0 atm...
-
Q1) What is the a3 Value Q2) What is the a7 Value Q3) What is the a4 Value Q4) What is the b3 Value Q5) What is the b2 Value Q6) What is the sign of 2nd constraint? A pastry chef at a bakery wants to...
-
Explain why, under non- ideal conditions, it is necessary to trade off relevance and reliability when estimating future cash flows. Define relevance and reliability as part of your answer.
-
An investor considers two mutual funds. Based on past experience, the first fund has an expected return of 0.08 and a standard deviation of 0.05. The second fund has an expected return of 0.07 and a...
-
You estimate empirically the ERC of firm J as 0.38. Firm K is identical to firm J in terms of size, earning power, persistence of earnings, and risk. Unlike firm J, however, firm K includes a high-...
-
How might the three categories of management assertions provide a powerful tool for the financial statement auditor?
-
Summarize the major changes made in ISO 9000-2015.
-
1. E-Z Open Manufacturing Company is a leading maker of manual can openers. In the year just closed, E-Z Open controlled 17.2% of the manual can opener market in North America. That placed the...
Study smarter with the SolutionInn App