Assuming there is the need for CONVEX Ltd. to prepare consolidated financial statements and CONCAVE Ltd. has presented its separate financial statement to CONVEX Ltd., comment on how the following transactions between CONVEX Ltd. and CONCAVE Ltd. will be accounted for in the consolidated financial statements and explain to management the reason for the suggested treatment. (a) At the date of acquisition, the fair value of all the assets of CONVEX Ltd. were the same as their carrying amounts with the exception of one of its equipment. This had a fair value of GH¢2million. The book value of this equipment was GH¢1.6 million before the acquisition. As a result of the fair valuation, the useful life of the equipment has been reviewed to 10 years remaining life. (b) At the acquisition date, CONVEX Ltd. paid GH¢20 million cash and promised to pay additional GH¢2 million if the vaccine production is successful. However, the value of net assets of CONCAVE Ltd. was just GH¢16 million.
Issue B
Assuming there is the need for CONVEX Ltd. to prepare consolidated financial statements and CONCAVE Ltd. has presented its separate financial statement to CONVEX Ltd., comment on how the following transactions between CONVEX Ltd. and CONCAVE Ltd. will be accounted for in the consolidated financial statements and explain to management the reason for the suggested treatment.
(a) At the date of acquisition, the fair value of all the assets of CONVEX Ltd. were the same as their carrying amounts with the exception of one of its equipment. This had a fair value of GH¢2million. The book value of this equipment was GH¢1.6 million before the acquisition. As a result of the fair valuation, the useful life of the equipment has been reviewed to 10 years remaining life.
(b) At the acquisition date, CONVEX Ltd. paid GH¢20 million cash and promised to pay additional GH¢2 million if the vaccine production is successful. However, the value of net assets of CONCAVE Ltd. was just GH¢16 million.
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