Question
On 1 January 2009, Hornet plc acquired 3,307,500 shares out of the 16,537,500 outstanding shares of Alton plc for $ 56 M. The fair value
On 1 January 2009, Hornet plc acquired 3,307,500 shares out of the 16,537,500 outstanding shares of Alton plc for $ 56 M. The fair value of net assets of Alton at this date was $ 441 M. Alton earned a profit of $175 M for year ended 31/12/2009 and paid $ 56 M dividend. On 1 January 2010, Hornet acquired 6,615,000 additional shares in Alton for a further cash payment of $ 84 M. The fair value of identifiable net assets of Alton at 1 January 2010 was $ 612.5 M. The full goodwill method is used.
The gain/loss on re-measuring the previously held 3,307,500 shares in Alton on 1 January 2010 is?
Select one:
a. Loss $ 70 M
b. Gain$ 49 M
c. None of the answers is correct
d. Loss $19.6875 M
e. No gain or loss is recognized as the additional purchase is treated as a transaction between the owners.
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