Princess Ltd acquired 90% of the issued shares of Karen Ltd on 1 January 2016. The following
Question:
Princess Ltd acquired 90% of the issued shares of Karen Ltd on 1 January 2016. The following were incurred by Princess Ltd in the acquisition of Karen Ltd:
- An issuance of 10,000 Princess Ltd’s shares to Karen’s shareholders. The market value of its shares is $2 per share.
- Cash payment of $20,000 to Karen Ltd’s shareholders.
- Cash payment of $5,000 for professional services relating to the business combination.
At the acquisition date, the statement of financial position of Karen Ltd and fair value adjustments to its assets and liabilities are as follows:
Princess Ltd acquired 90% of the issued shares of Karen Ltd on 1 January 2016. The following were incurred by Princess Ltd in the acquisition of Karen Ltd:
At the acquisition date, the statement of financial position of Karen Ltd and fair value adjustments to its assets and liabilities are as follows:
Karen did not recognise the fair value adjustment in its books. Additional information a) The fixed assets have a useful life of 10 years as at 1 January 2016, with zero residual value. The straight-line method is used. b) Inventory as at 1 January 2016 was sold to third parties during the year. c) In 2017, the impaired debts provided and the contingent liability were actualized, and recognised as expenses in the books of Karen Ltd. d) Ignore the effects of taxation from fair value adjustments Required:
|
International Financial Reporting A Practical Guide
ISBN: 978-1292200743
6th edition
Authors: Alan Melville