Question
The summarised balance sheets for Fred and George as on 31 December 20X4 are as follows: Fred George m m Investment in George (at cost)
The summarised balance sheets for Fred and George as on 31 December 20X4 are as follows:
| Fred | George |
| m | m |
Investment in George (at cost) | 3 |
|
Sundry net assets | 4 | 5 |
| 7 | 5 |
Ordinary 1 shares | 2 | 1 |
Share premium account | 2 |
|
Revenue Reserves | 3 | 4 |
Total net assets | 7 | 5 |
Fred invested in George some years ago by offering a 1 for 1 swap for all of Georges shares. At the time Freds shares had a market value of 3, Georges reserves were 1m and the fair value of Georges assets were the same as their net book value. There have been no changes in Georges share capital since then.
What would be Fred Groups consolidated revenue reserves under the acquisition and uniting of interests (merger) methods of accounting for business combinations?
a.
Acquisition Uniting of interests
6m 7m
b.
Acquisition Uniting of interests
5m 7m
c.
Acquisition Uniting of interests
5m 6m
d.
Acquisition Uniting of interests
6m 6m
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