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Kit acquired 1600,000 shares of spoon 3 years ago when the Retained earnings of spoon stood at $ 750,000. Pot paid an initial cash consideration

Kit acquired 1600,000 shares of spoon 3 years ago when the Retained earnings of spoon stood at $ 750,000. Pot paid an initial cash consideration of $ 3m, made a share exchange of 3 shares for every 5 shares received from spoon and promised to pay a further $1.5m in 4years time. The market value of Pots shares at the time of acquisition stood at $2m and that of Spoon was at $1.2. The current interest rate is 10%.

Below are the financial statements of Pot and Spoon as at 30 June 20X9

Statement of financial position of Pot and spoon as at 30 June 20X9

kit

Spoon

$000

$000

NON CURENT ASSETS

Property plant and Equipment

2,800

3,400

Investments

3,600

Current Assets

1,500

750

Total assets

7,900

4,150

Share capital

3,500

2,000

share premium

1,400

500

retained earnings

1,800

1,200

6,700

3,700

Non-current Liabilities

800

300

Current liabilities

400

150

Total Equity & Liabilities

7,900

4,150

Statements of profit or loss for the year ended 30 June 20X9

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