A Ltd pays $90,000 to acquire 90% of the shares of B Ltd on 1 January 20x4 when B Ltd was incorporated with share capital of $100,000 (comprising 100,000 ordinary shares at $1 each). On 1 January 20x8, when the fair value of B Ltd's identifiable net assets was represented by share capital of $100,000 and retained profit of $40,000 and A Ltd's shares are traded at $1.50 per share, A Ltd sells 80% of the shares (and retains 10% of the shares) of B Ltd for cash consideration of $120,000. The 10% shareholding in B Ltd is accounted for as “held-for-trading" securities and the shares are traded at $2 per share on 31 December 20x8. In this case, the fair value gain in A Ltd's consolidated financial statements is: 1. $6,000. 2. None of the listed choices. 3. $10,000. 4. $5,000. $0.
A Ltd pays $90,000 to acquire 90% of the shares of B Ltd on 1 January 20x4 when B Ltd was incorporated with share capital of $100,000 (comprising 100,000 ordinary shares at $1 each). On 1 January 20x8, when the fair value of B Ltd's identifiable net assets was represented by share capital of $100,000 and retained profit of $40,000 and A Ltd's shares are traded at $1.50 per share, A Ltd sells 80% of the shares (and retains 10% of the shares) of B Ltd for cash consideration of $120,000. The 10% shareholding in B Ltd is accounted for as “held-for-trading" securities and the shares are traded at $2 per share on 31 December 20x8. In this case, the fair value gain in A Ltd's consolidated financial statements is: 1. $6,000. 2. None of the listed choices. 3. $10,000. 4. $5,000. $0.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A Ltd pays $90,000 to acquire 90% of the
shares of B Ltd on 1 January 20x4 when B Ltd
was incorporated with share capital of
$100,000 (comprising 100,000 ordinary
shares at $1 each). On 1 January 20x8, when
the fair value of B Ltd's identifiable net assets
was represented by share capital of $100,000
and retained profit of $40,000 and A Ltd's
shares are traded at $1.50 per share, A Ltd
sells 80% of the shares (and retains 10% of the
shares) of B Ltd for cash consideration of
$120,000. The 10% shareholding in B Ltd is
accounted for as “held-for-trading" securities
and the shares are traded at $2 per share on
31 December 20x8. In this case, the fair value
gain in A Ltd's consolidated financial
statements is:
1. $6,000.
2. None of the listed choices.
3. $10,000.
4. $5,000.
$0.
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