(a) Assume that on I January 20X7 Parent Ltd acquired all the ordinary shares in Daughter Ltd for £10,800 cash. The fair value of the net assets in Daughter Ltd was their book value.

(b) The purchase consideration was satisfied by the issue of 5,400 new ordinary shares in Parent Ltd. The fair value of a £1 ordinary share in Parent Ltd was £2. The fair value of the net assets in Daughter Ltd was their book value.

Required in each case:
Prepare the statements of financial position of Parent Ltd and the consolidated statement of finan¬ cial position as at I January 20X7 after each transaction, using for each question the statements of financial position of Parent Ltd and Daughter Ltd as at I January 20X7 which were as follows:

Transcribed Image Text:

Parent Ltd Daughter Ltd E Ordinary shares of 1 each 40,500 9,000 Retained earnings 4,500 1,800 45,000 10,800 Cash 20,000 2,000 Other net assets 25,000 8,800 45,000 10,800