On 1 August 20X7 Patronic Co purchased 18 million of the 24 million $1 equity shares of Sardonic Co. The acquisition was through a share exchange of two shares in Patronic Co for every three shares in Sardonic Co. The market price of a share in Patronic Co at 1 August 20X7 was $5.75. Patronic Co will also pay in cash on 31 July 20X9 (two years after acquisition) $2.42 per acquired share of Sardonic Co.Patronic Co's cost of capital is 10% per annum.What is the amount of the consideration attributable to Patronic Co for the acquisition of Sardonic Co?
A. $105 million
B. $139.5 million
C. $108.2 million
D. $103.8 million
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Crash Co acquired 70% of Bang Co's 100,000 $1 ordinary shares for $800,000 when the retained earnings of Bang Co were $570,000 and the balance in its revaluation surplus was $150,000. Bang Co also has an internally developed customer list which has been independently valued at $90,000. The non-controlling interest in Bang Co was judged to have a fair value of $220,000 at the date of acquisition.What was the goodwill arising on acquisition?
A. $200,000
B. $163,000
C. $226,000
D. $110,000
Phantom Co acquired 70% of the $100,000 equity share capital of Ghost Co, its only subsidiary, for $200,000 on 1 January 20X9 when the retained earnings of Ghost Co were $156,000.At 31 December 20X9 retained earnings are as follows: $ Phantom Co 275,000 Ghost Co 177,000 Phantom Co considers that goodwill on acquisition is impaired by 50%. Non-controlling interest is measured at fair value, estimated at $82,800.Using the drop down box, select what are group retained earnings at 31 December 20X9?
A. $262,900
B. $280,320
C. $289,700
D. $585,700
Tazer Co, a parent company, acquired Lowdown Co, an unincorporated entity, for $2.8 million. A fair value exercise performed on Lowdown Co's net assets at the date of purchase showed: $'000 Property, plant and equipment 3,000 Identifiable intangible asset 500 Inventories 300 Trade receivables less payables 200 4,000 How should the purchase of Lowdown be reflected in Tazer Co's consolidated statement of financial position?
A. Record the net assets at their values shown above and credit profit or loss with $1.2 million
B. Record the net assets at their values shown above and credit Tazer Co's consolidated goodwill with $1.2 million
C. Write off the intangible asset ($500,000), record the remaining net assets at their values shown above and credit profit or loss with $700,000
D. Record the purchase as a financial asset investment at $2.8 million
Overstatement of profits can arise during periods of inflation. This then leads to a number of other consequences. Which of the following is NOT a likely consequence of overstatement of profits?
A. Higher wage demands from employees
B. Higher tax bills
C. Reduced dividends to shareholders
D. Overstated EPS