Answered step by step
Verified Expert Solution
Link Copied!

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 60 per cent of S Co on 1 January 20X9.
Rather than pay cash for S Co.'s shares, P Co. has funded the acquisition by issuing 4.5m of its own shares to S Co.'s shareholders.
S Co.'s shares have a market value of Euro 3. The costs of the share issue amounted to Euro 500,000 and P Co. paid a total of Euro 600,000 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 200 and there is no change in the reserves.
The following are the Statements of Financial Position of P Co. and S Co. at 31 December 20X9.
You are required to prepare workings for consolidation and the consolidated Statement of financial position at the date of acquistion.
P Co. S Co.
"000""000"
Assets Euros Euros
Current assets
Cash 6900,0050,00
Accounts receivable 200,00150,00
Inventories 4290,00690,00
Non Current assets
Property, plant and equipment 5147,102000,00
Investment in S.Co 13500,00-
Capitalized legal cost 500,00
30537,102890,00
Liabilities
Current liabilities
Accounts payable 1369,00290,00
Accrued expenses 1588,10310,00
Non Current liabilities
Long term loans 11698,001000,00
Deferred consideration for acquisition of subsidiary (see workings)-
Equity
Share Capital 4860,00450,00
Share premium account 9000,00-
Reserves 1136,00350,00
Retained earnings 886,00490,00
30537,102890,00
--
P Co.
Consolidated Statement of Financial Position As of 31 Dec 20x9
Euros Euros
"000""000"
Assets
Current assets
Cash (400+50)6950,006577,00
Accounts receivable (200+150)350,00466,00
Inventories (1,690+190)4980,004668,00
Non Current assets
Property, plant and equipment
(5,580+2,500+890)7147,105778,00
Investment in S Co.-
Goodwill (see workings)12900,00-
Capitalized legal cost 400,00-
32727,1017489,00
Liabilities
Current liabilities
Accounts payable (1,369+290)1659,001070,00
Accrued expenses (429+310)1898,101658,00
Non Current liabilities
Long term loans (2,450+1,000)12698,0012577,00
Deferred consideration for acquisition of subsidiary (see workings)-
Equity
Share Capital 4860,00360,00
Share premium account 9000,00-
Reserves (see workings)1136,001136,00
Retained earnings (see workings)960,00688,00
15956,002184,00
Non-controlling interest (see workings)516,00-
32727,1017489,00
--
Assume that P Co. sold all its investment in S Co. for Euro 14 million Euro on 31 December 20X9. 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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Accounting

Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones

10th Edition

324300980, 978-0324300987

More Books

Students also viewed these Accounting questions

Question

What is a credit limit? How can you increase your credit limit?

Answered: 1 week ago

Question

=+ (d) Show that \, (He 0) =0 and A*(H) =1.

Answered: 1 week ago

Question

Dillon Company Income Statement For the year ended Dec - 31 00 00

Answered: 1 week ago

Question

Explain the nature of human resource management.

Answered: 1 week ago

Question

Write a note on Quality circles.

Answered: 1 week ago

Question

Describe how to measure the quality of work life.

Answered: 1 week ago

Question

List behaviors to improve effective leadership in meetings

Answered: 1 week ago