Answered step by step
Verified Expert Solution
Question
1 Approved Answer
P Co . has just acquired 6 0 per cent of S Co on 1 January 2 0 X 9 . Rather than pay cash
P Co has just acquired per cent of S Co on January X
Rather than pay cash for S Cos shares, P Co has funded the acquisition by issuing m of its own shares to S Cos shareholders.
S Cos shares have a market value of Euro The costs of the share issue amounted to Euro and P Co paid a total of Euro to lawyers and accountants to carry out the combination.
Calculate the goodwill.
At the date of acquisition the retained earnings of S Co were Euro and there is no change in the reserves.
The following are the Statements of Financial Position of P Co and S Co at December X
You are required to prepare workings for consolidation and the consolidated Statement of financial position at the date of acquistion.
P Co S Co
Assets Euros Euros
Current assets
Cash
Accounts receivable
Inventories
Non Current assets
Property, plant and equipment
Investment in SCo
Capitalized legal cost
Liabilities
Current liabilities
Accounts payable
Accrued expenses
Non Current liabilities
Long term loans
Deferred consideration for acquisition of subsidiary see workings
Equity
Share Capital
Share premium account
Reserves
Retained earnings
P Co
Consolidated Statement of Financial Position As of Dec x
Euros Euros
Assets
Current assets
Cash
Accounts receivable
Inventories
Non Current assets
Property, plant and equipment
Investment in S Co
Goodwill see workings
Capitalized legal cost
Liabilities
Current liabilities
Accounts payable
Accrued expenses
Non Current liabilities
Long term loans
Deferred consideration for acquisition of subsidiary see workings
Equity
Share Capital
Share premium account
Reserves see workings
Retained earnings see workings
Noncontrolling interest see workings
Assume that P Co sold all its investment in S Co for Euro million Euro on December X In this case make the revised calculations and prepare the Statement of Financial Position of P Co
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started