On 1 July 2015, Monageng Limited concluded an agreement to purchase 75% of the ordinary shares in Selongo Limited. The terms of the purchase agreement include, among other things, the following: • Monageng Limited will settle for the 75% of the ordinary shares by paying cash of R200 000 in addition to issuing 100 000 of its own 10% preference shares to the owners of the 75% ordinary shares on 30 September 2015. The price of the10% preference shares on 30 September 2015 was R2.50 each. e oft • Monageng Limited will only be able to appoint its directors to the board of Selongo Limited on 1 August 2015 after the year end date of Selongo Limited which is on 31 July 2015. All the ordinary shares of Selongo Limited are entitied to vote at the company's AGM but preference shares are not entitled to vote. What is the value of the purchase consideration? Select one: O a. R200 000 O b. R300 000 O G R250 000 O d. R450 000

On 1 July 2015, Monageng Limited concluded an agreement to purchase 75% of the ordinary shares in Selongo Limited. The terms of the purchase agreement include, among other things, the following: • Monageng Limited will settle for the 75% of the ordinary shares by paying cash of R200 000 in addition to issuing 100 000 of its own 10% preference shares to the owners of the 75% ordinary shares on 30 September 2015. The price of the10% preference shares on 30 September 2015 was R2.50 each. e oft • Monageng Limited will only be able to appoint its directors to the board of Selongo Limited on 1 August 2015 after the year end date of Selongo Limited which is on 31 July 2015. All the ordinary shares of Selongo Limited are entitied to vote at the company's AGM but preference shares are not entitled to vote. What is the value of the purchase consideration? Select one: O a. R200 000 O b. R300 000 O G R250 000 O d. R450 000

Financial Accounting

14th Edition

ISBN:9781305088436

Author:Carl Warren, Jim Reeve, Jonathan Duchac

Publisher:Carl Warren, Jim Reeve, Jonathan Duchac

Chapter15: Investments And Fair Value Accounting

Section: Chapter Questions

Problem 28E

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On 1 July 2015, Monageng Limited concluded an agreement to purchase 75% of the ordinary shares in Selongo Limited. The terms of the purchase agreement include, among other things, the following: Monageng Limited will settle for the 75% of the ordinary shares by paying cash of R200 000 in addition to issuing 100 000 of its own 10% preference shares to the owners of the 75% ordinary shares on 30 September 2015. The price of the10% preference shares on 30 September 2015 was R2.50 each. Monageng Limited will only be able to appoint its directors to the board of Selongo Limited on 1 August 2015 after the year end date of Selongo Limited which is on 31 July 2015. All the ordinary shares of Selongo Limited are entitled to vote at the company’s AGM but preference shares are not entitled to vote. What is the acquisition date of this business combination? Select one: a. 1 July 2015 b. 30 September 2015 c. 1 August 2015 d. 1 October 2015
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $1,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised fimancial statements of both companies are as follows: r Snip Statement of Comprehensive Income for the year ended 31 December 2015 Ausra S 00 120,000 Danute S 000 48,000 Revenue Costof sales Gross profit Operating expenses Profit from operations Other income (84,000) 36,000 (11,900) 24,100 (40,000) 8,000 (400) 7,600 300 Fimance costs (1,200) 6,400 Profit before tax 24,400 Income tax expense Profit for the year (6,000) 18,400 (1,200) 5,200 Statements of Financial Position at 31 December 2015 Ausra Danute S 000 S 000 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra's share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute's 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Rect ular Snip Ausra S 000 Danute S 0 Profit for the year 18,400 5,200 Statements of Financial Position at 31 December 2015 Ausra S 000 Danute $ 00 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 54,920 16,000 Current assets Inventory 11,240 6,450 Receivables 13,600 5,160 30,000 7,355 2,195 16,000 Bank Total Assets 84,920 32,000 Equity and liabilities Ordinary shares of $1 each Retained earnings 40,000 4,000 17,720 8,800 Revaluation reserve…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statements of Financial Position at 31 December 2015 Ausra Danute $ 000 $ 000 Non-current assets: Property, plant and equipment 38,640 16,000 Investments 16,280 - 54,920 16,000 Equity and liabilities Ordinary shares of $1 each 40,000 4,000 Retained earnings 17,720 8,800 Revaluation reserve 7,200 - 64,920 12,800 Non-current liabilities 10% loan notes - 10,000 Current Liabilities 20,000 9,200 The following…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 The following information is relevant:…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Ausra Danute $ 000 $ 000 Non-current assets: Property, plant and equipment 38,640 16,000…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31…
On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows: Statement of Comprehensive Income for the year ended 31 December 2015 Ausra Danute $ 000 $ 000 Revenue 120,000 48,000 Cost of sales (84,000) (40,000) Gross profit 36,000 8,000 Operating expenses (11,900) (400) Profit from operations 24,100 7,600 Other income 300 - Finance costs - (1,200) Profit before tax 24,400 6,400 Income tax expense (6,000) (1,200) Profit for the year 18,400 5,200 Statements of Financial Position at 31…
Purple Ltd has recently undertaken a business combination with Yellow Ltd. At the start of negotiations, Purple Ltd owned 30% of the shares of Yellow Ltd. The current discussions between the two entities concerned Purple Ltd’s acquisition of the remaining 70% of shares of Yellow Ltd. The negotiations began on 1 January 2022 and enough shareholders in Yellow Ltd agreed to the deal by 30 September 2022. The purchase agreement was for shareholders in Yellow Ltd to receive in exchange shares in Purple Ltd. Over the negotiation period, the share price of Purple Ltd shares reached a low of $5.40 and a high of $6.20. The accountant for Purple Ltd, Mr Nashville, knows that AASB 3 has to be applied in accounting for business combinations. However, he is confused as to how to account for the original 30% investment in Yellow Ltd, what share price to use to account for the issue of Purple Ltd’s shares, and how the varying dates such as the date of exchange and acquisition date will affect the…