Question
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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