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Jack acquires 24 million 1 shares (80%) of the ordinary shares of Becky by offering a share forshare exchange of two shares for every three
Jack acquires 24 million 1 shares (80%) of the ordinary shares of Becky by offering a share forshare exchange of two shares for every three shares acquired in Becky and a cash payment of 1 per share payable three years later. Jack's shares have a nominal value of 1 and a current market value of 2. The cost of capital is 10% and 1 receivable in 3 years can be taken as 0.75.
Required
(i) Calculate the cost of investment and show the journals to record it in Jack's accounts.
(ii) Show how the discount would be unwound.
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