Trifles Ltd acquired 280,000 shares in Bamburg Ltd on 01 July 2019 and as a result Trifles Ltd has a control of 80% in Bamburg. The purchased consideration transferred by Trifles Ltd in exchange of the shares in Bamburg Ltd was as follows: (i) Cash paid of $ 565,000 (ii) Cash to be paid in four year time is $ 500,000 (iii) Share exchange of two shares in Trifles Ltd for every seven shares in Bamburg Ltd. The market price of Trifles Ltd at the date of acquisition was $ 3. The par value of Trifles Ltd’ ordinary shares is $ 0.5 each. Legal fees associated with the acquisition were $ 75,000. The cost of capital of Trifles Ltd is 15%. a) Calculate the fair value of the consideration to acquire control of Bamburg Ltd at the acquisition date. Your answer should include a brief explanation if any of the above issue(s) is/are not required to be accounted in your working(s).
Trifles Ltd acquired 280,000 shares in Bamburg Ltd on 01 July 2019 and as a result
Trifles Ltd has a control of 80% in Bamburg. The purchased consideration transferred
by Trifles Ltd in exchange of the shares in Bamburg Ltd was as follows:
(i) Cash paid of $ 565,000
(ii) Cash to be paid in four year time is $ 500,000
(iii) Share exchange of two shares in Trifles Ltd for every seven shares in
Bamburg Ltd. The market price of Trifles Ltd at the date of acquisition was
$ 3. The par value of Trifles Ltd’ ordinary shares is $ 0.5 each.
Legal fees associated with the acquisition were $ 75,000.
The cost of capital of Trifles Ltd is 15%.
a) Calculate the fair value of the consideration to acquire control of Bamburg
Ltd at the acquisition date. Your answer should include a brief
explanation if any of the above issue(s) is/are not required to be
accounted in your working(s).
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