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Subject:AccountingPrice: Bought3

Question No.3

a. Mega PLC acquired 60% ordinary shares of Buddy PLC on 31 March 2020 when Buddy's share capital and retained profit stood at Rs.50 million and Rs. 30 million respectively. Fair value of the non-controlling interest as at that date was Rs.36 million. The share capital of Buddy PLC represents 5 million ordinary shares. In order to settle the purchase consideration Mega PLC agreed to following arrangements.

 

- To issue 2 shares of Mega PLC for each share acquired from Buddy PLC. The share price of Mega PLC at the date of acquisition was Rs.6.

- To make an immediate cash payment of Rs 8 million

- To make a final cash payment of Rs.11million on 31 March 2021 Company's cost of capital is 10%

 

Required,

 

1. Fair value of the investment made by Mega PLC to acquire the 60% shares of Buddy PLC?

2. Goodwill on acquisition.

 

 

b. Club PLC acquired 80% ordinary shares of Diamond PLC on 31 March 2019 for Rs. 48 million when Diamond PLC share capital and retained profit balances were Rs.40 million and 10 million respectively. The non-controlling interest as at acquisition was valued at fair value of Rs.12 million.

 

Following balances were extracted from the statement of financial position of Diamond PLC as at 31 March 2020.

 

Share capital Rs.40 million

Retained profit Rs Rs.15 million

 

The impairment test performed as at 31 March 2020 revealed followings

 

Present value of the future expected cash flows (value in use) of Diamond PLC as a cash generating unit is Rs.63 million

 

Fair value less cost to sell of Rs.60 million

 

Required

1. Goodwill at acquisition

2. Impairment of goodwill (if any) as at 31 March 2020

3. Non-controlling interest as at 31 March 2020 

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