Mission Ltd considered the takeover of Impossible Ltd. Both companies operated in the mining industry, but Impossible Ltd had access to some infrastructure assets that would be useful to the operations of Mission Ltd, in particular, both railroad and port facilities. After due consideration including an in-depth financial analysis of the project, on 1 January 2016, Mission Ltd made an offer to the shareholders of Impossible Ltd:Mission Ltd would pay three fully paid ordinary shares in Mission Ltd plus $3.20 cash for every preference share in Impossible Ltd, payable at acquisition date.Mission Ltd would pay two fully paid ordinary shares in Mission Ltd plus $1.50 in cash for every ordinary share in Impossible Ltd. Half the cash is payable at acquisition, and the other half is payable in one year’s time. However, part of the deal was that 90% of the shareholders of Impossible Ltd had to accept the deal by the closing date of the offer, 30 March 2016. The shareholders of Impossible Ltd took financial advice and the majority decided that this was a worthwhile offer. Of the ordinary and preference shareholders, all accepted the offer. At 30 March 2016, the share capital of Impossible Ltd consisted of 100000 fully paid ordinary shares at $2 per share, while the preference share capital consisted of 50000 5% preference shares issued at $2 per share. The contract was agreed to on 1 April 2016. At that date, the fair value of each Mission Ltd share, based on recent market transactions, was $3.80. Mission Ltd’s borrowing rate on current debt was 9% p.a. The cost of issuing the ordinary shares in Mission Ltd was $1500 for the shares issued to the former Impossible Ltd preference shareholders and $2400 for the shares issued to the former ordinary shareholders in Impossible Ltd. Required Prepare the acquisition analysis of the shares of Impossible Ltd at 1 April 2016 and the deferred payment on 1 April 2017 and calculate the total amount of consideration transferred.

Mission Ltd considered the takeover of Impossible Ltd. Both companies operated in the mining industry, but Impossible Ltd had access to some infrastructure assets that would be useful to the operations of Mission Ltd, in particular, both railroad and port facilities. After due consideration including an in-depth financial analysis of the project, on 1 January 2016, Mission Ltd made an offer to the shareholders of Impossible Ltd:Mission Ltd would pay three fully paid ordinary shares in Mission Ltd plus $3.20 cash for every preference share in Impossible Ltd, payable at acquisition date.Mission Ltd would pay two fully paid ordinary shares in Mission Ltd plus $1.50 in cash for every ordinary share in Impossible Ltd. Half the cash is payable at acquisition, and the other half is payable in one year’s time. However, part of the deal was that 90% of the shareholders of Impossible Ltd had to accept the deal by the closing date of the offer, 30 March 2016. The shareholders of Impossible Ltd took financial advice and the majority decided that this was a worthwhile offer. Of the ordinary and preference shareholders, all accepted the offer. At 30 March 2016, the share capital of Impossible Ltd consisted of 100000 fully paid ordinary shares at $2 per share, while the preference share capital consisted of 50000 5% preference shares issued at $2 per share. The contract was agreed to on 1 April 2016. At that date, the fair value of each Mission Ltd share, based on recent market transactions, was $3.80. Mission Ltd’s borrowing rate on current debt was 9% p.a. The cost of issuing the ordinary shares in Mission Ltd was $1500 for the shares issued to the former Impossible Ltd preference shareholders and $2400 for the shares issued to the former ordinary shareholders in Impossible Ltd. Required Prepare the acquisition analysis of the shares of Impossible Ltd at 1 April 2016 and the deferred payment on 1 April 2017 and calculate the total amount of consideration transferred.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

100%

Mission Ltd considered the takeover of Impossible Ltd. Both companies operated in the mining industry, but Impossible Ltd had access to some infrastructure assets that would be useful to the operations of Mission Ltd, in particular, both railroad and port facilities. After due consideration including an in-depth financial analysis of the project, on 1 January 2016, Mission Ltd made an offer to the shareholders of Impossible Ltd: Mission Ltd would pay three fully paid ordinary shares in Mission Ltd plus $3.20 cash for every preference share in Impossible Ltd, payable at acquisition date. Mission Ltd would pay two fully paid ordinary shares in Mission Ltd plus $1.50 in cash for every ordinary share in Impossible Ltd. Half the cash is payable at acquisition, and the other half is payable in one year’s time. However, part of the deal was that 90% of the shareholders of Impossible Ltd had to accept the deal by the closing date of the offer, 30 March 2016. The shareholders of Impossible Ltd took financial advice and the majority decided that this was a worthwhile offer. Of the ordinary and preference shareholders, all accepted the offer. At 30 March 2016, the share capital of Impossible Ltd consisted of 100000 fully paid ordinary shares at $2 per share, while the preference share capital consisted of 50000 5% preference shares issued at $2 per share. The contract was agreed to on 1 April 2016. At that date, the fair value of each Mission Ltd share, based on recent market transactions, was $3.80. Mission Ltd’s borrowing rate on current debt was 9% p.a. The cost of issuing the ordinary shares in Mission Ltd was $1500 for the shares issued to the former Impossible Ltd preference shareholders and $2400 for the shares issued to the former ordinary shareholders in Impossible Ltd. Required Prepare the acquisition analysis of the shares of Impossible Ltd at 1 April 2016 and the deferred payment on 1 April 2017 and calculate the total amount of consideration transferred.

Expert Solution

Step by step

Solved in 2 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.