The following acquisition analysis relates to a non-sequential acquisition,at the time that Ginger Ltd acquires a controlling interest (acquiring 60 per cent)in Posh Ltd.Posh Ltd had previously acquitted 75 per cent of Scary Ltd. $\begin{array}{|l|r|r|}
\hline & \text { Posh Ltd } & \begin{array}{r}
\text { Ginger Ltd } \
\text { interest }
\end{array} \
\hline \text { Share capital at acquisition date } & 280000 & \text { (a) } \
\text { Retained earnings at acquisition date } & 124000 & \text { (b) } \
\text { Share of post-acquisition earnings of Scary Ltd attributable to Posh } & 90000 & \text { (c) } \
\text { Ltd prior to Ginger's acquisition of Posh Ltd } & & \
\text { Increase in retained earnings of Scary Ltd } & & \
\text { ((d) }-56000) & & \
\hline
\end{array}$ What are the figures represented by (a)and (b)in the table above?

Question

Quizplus · Accepted Answer

To calculate the figures represented by (a) and (b), we need to use the formula for calculating the acquisition cost:
Acquisition cost = (percentage acquired x subsidiary's total assets) - fair value of subsidiary's net identifiable assets

(a) To find the acquisition cost of Posh Ltd, we need to subtract the fair value of Posh Ltd's net identifiable assets from 60% of Posh Ltd's total assets:
Acquisition cost of Posh Ltd = (60% x €420,000) - €190,000 = €168,000

(b) To find the acquisition cost of Scary Ltd (held by Posh Ltd), we need to subtract the fair value of Scary Ltd's net identifiable assets from 75% of Scary Ltd's total assets:
Acquisition cost of Scary Ltd = (75% x €180,000) - €105,600 = €74,400

Therefore, the best choice is B, with (a) being €168,000 and (b) being €74,400.

The Following Acquisition Analysis Relates to a Non-Sequential Acquisition,at the Time