The following trial balance relates to Atlas at 31 March 2013:
On 1 October 20X0, Paladin secured a majority equity shareholding in Saracen on the following terms.
An immediate payment of $4 per share on 1 October 20X0; and a further amount deferred until 1 October 20X1 of $5.4 million.
The immediate payment has been recorded in Paladin's financial statements, but the deferred payment has not been recorded. Paladin's cost of capital is 8% per annum, giving the deferred payment a current cost at 1 October 20X0 of $5 million.
On 1 January 20X4, Plastik acquired 80% of the equity share capital of Subtrak. The consideration was satisfied by a share exchange of two shares in Plastik for every three acquired shares in Subtrak. At the date of acquisition, shares in Plastik and Subtrak had a market value of $3 and $2.50 each respectively. Plastik will also pay cash consideration of 27.5 cents on 1 January 20X5 for each acquired share in Subtrak. Plastik has a cost of capital of 10% per annum. None of the consideration has been recorded by Plastik.
Highveldt, a public listed company, acquired 75% of Samson's ordinary shares on 1 April 20X4. Highveldt paid an immediate $3·50 per share in cash and agreed to pay a further amount of $108 million on 1 April 20X5. Highveldt's cost of capital is 8% per annum. Highveldt has only recorded the cash consideration of $3·50 per share.
The summarized statements of financial position of the two companies at 31 March 20X5 are shown below:
On 1 April 20X8, Pedantic acquired 60% of the equity share capital of Sophistic in a share exchange of two shares in Pedantic for three shares in Sophistic. At that date the retained earnings of Sophistic were $5 million. The issue of shares has not yet been recorded by Pedantic. At the date of acquisition shares in Pedantic had a market value of $6 each. Below are the summarized draft statements of financial position of both companies.