A Ltd acquires 100% of shares of B Ltd for $195,000,financed by an issue of 100,000 x $1.50 shares and $45,000 cash.B Ltd has cash balances of $35,000 at the date of acquisition.A Ltd will record the following in its consolidated statement of cash flows:

Question

Quizplus · Accepted Answer

The correct option is cash flow from investing ($10,000). This is because A Ltd acquired B Ltd for $195,000, which included $45,000 cash and 100,000 shares. However, B Ltd had cash balances of $35,000 at the date of acquisition. Therefore, A Ltd only required $10,000 cash to complete the purchase after using B Ltd's existing cash balances of $35,000. Hence, the cash flow from investing should be recorded as ($10,000) in the consolidated statement of cash flows.

A Ltd Acquires 100% of Shares of B Ltd for $195,000,financed