Two companies, A and M have balance sheets as at 31 December 20XX as shown in Table 14.13.

acquired the whole of the share capital of M on the basis of a one-for-one share exchange as at the above date (not yet reflected in A’s balance sheet), at which point the market (unit) values of their respective shares were i4 for both A and M.
The fair values of M’s tangible assets as at 31 December 20XX were:

Prepare consolidated balance sheets under both the acquisition and merger methods. Comment on the major differences that emerge.

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Table 14.13 Balance sheets for A and M as at 31 December 20XX A M Plant and machinery 6,000 7,000 Net current assets 5,000 2,000 11,000 9,000 Ordinary shares (1) 9,000 6,000 Reserves 2,000 3,000 11,000 9,000