During August 20X5,Atticus Ltd acquired the issued capital of Finch Pty Ltd in exchange for 1 000 000 shares in Atticus Ltd with a fair value of $10 per share.Share issue costs amounted to $400 000 and an amount of $400 000 was paid to consultants.Atticus Ltd also took over the loans payable to the shareholders of Finch Pty Ltd by that company of $2 000 000.The cost of the investment is:

Question

Quizplus · Accepted Answer

The cost of the investment includes the fair value of the shares, share issue costs, and any additional consideration given. Therefore, the cost of the investment is:
Fair value of shares = 1,000,000 shares x $10 per share = $10,000,000 
Share issue costs = $400,000 
Additional consideration (payment to consultants) = $400,000 
Plus, the loans payable taken over = $2,000,000 
Total cost of investment = $10,000,000 + $400,000 + $400,000 + $2,000,000 = $12,800,000. Therefore, the correct answer is A.

During August 20X5,Atticus Ltd Acquired the Issued Capital of Finch