On 1 January 2019, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date. Issue of P’s shares - 1,200,000 shares [Note b] Immediate cash payment - $400,000 Deferred cash payment - $1,000,000 payable 2 years later Due diligence fees paid to lawyers - $20,000 Equipmen
On 1 January 2019, Company P purchased 80% of the equity of Company S. The following transactions arose at the acquisition date.
Issue of P’s shares - 1,200,000 shares [Note b]
Immediate cash payment - $400,000
Deferred cash payment - $1,000,000 payable 2 years later
Due diligence fees paid to lawyers - $20,000
Equipment transferred - $40,000 (fair value=book value)
Note:
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P’s effective interest rate was 5% per annum.
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P’s share price is $1.25
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The fair value of non-controlling interests at acquisition date was $640,000.
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Share capital and
Retained earnings of S were $1,000,000 and $900,000 respectively on 1 January 2019. On the same day, there was an intangible asset carried in S at $500,000 but the fair value of it was $700,000.
Required:
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