On 1 October 2010 Prodigal purchased 75% of the equity shares in Sentinel. The acquisition was through a share exchange of two shares in Prodigal for every three shares in Sentinel. The stock market price of Prodigal’s shares at 1 October 2010 was $4 per share.

The summarised statement of profit or loss and other comprehensive income for the two companies for the year ended 31 March 2011 are:

  

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Prodigal $'000 450,000 (260,000) Sentinel $'000 240,000 (110,000) Revenue Cost of sales Gross profit Distribution costs Administrative expenses Finance costs 190,000 (23,600) (27,000) (1,500) 130,000 (12,000) (23,000) (1,200) Profit before tax 137,900 93,800 (27,800) Income tax expense (48,000) Profit for the year 89,900 66,000 Other comprehensive income Gain on revaluation of land (note (i)) Loss on fair value of equity financial asset investment 2,500 (700) 1,000 (400) 1,800 600 Total comprehensive income 91,700 66,600 The following information for the equity of the companies at 1 April 2010 (i.e. before the share exchange took place) is available: Equity shares of $1 each Share premium Revaluation reserve (land) Other equity reserve (re equity financial asset investment) Retained earnings $'000 250,000 100,000 8,400 3,200 90,000 $'000 160,000 nil nil 2,200 125,000 Prodigal $'000 450,000 (260,000) Sentinel $'000 240,000 (110,000) Revenue Cost of sales Gross profit Distribution costs Administrative expenses Finance costs 190,000 (23,600) (27,000) (1,500) 130,000 (12,000) (23,000) (1,200) Profit before tax 137,900 93,800 (27,800) Income tax expense (48,000) Profit for the year 89,900 66,000 Other comprehensive income Gain on revaluation of land (note (i)) Loss on fair value of equity financial asset investment 2,500 (700) 1,000 (400) 1,800 600 Total comprehensive income 91,700 66,600 The following information for the equity of the companies at 1 April 2010 (i.e. before the share exchange took place) is available: Equity shares of $1 each Share premium Revaluation reserve (land) Other equity reserve (re equity financial asset investment) Retained earnings $'000 250,000 100,000 8,400 3,200 90,000 $'000 160,000 nil nil 2,200 125,000

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