Answer to Question #199973 in Management for jenitta

Question

1. Horizon Limited acquired 60% stake in Hope Ltd. Horizon Limited paid INR 144 millions in cash for their interest in Hope Ltd. The fair value of the assets of Hope Ltd is INR 360 millions, and the fair value of its liabilities is INR 180 millions. Pass journal entries for the acquisition as per Ind-AS guidelines for the below:

a. Entry or entries for takeover of assets and liabilities (5 Marks)

b. Define the term purchase consideration. Pass Entry or entries for payment of purchase consideration (5 Marks) (Make suitable assumptions if required and mention the same)

Answer 1

a).

60% of stock=INR 144 millions

fair value of the assets= INR 360 millions,

the fair value of its liabilities = INR 180 millions

b)

Purchase Consideration refers to the consideration payable by the purchasing company to the vendor company for taking over the assets and liabilities of Vendor Company. Therefore, term purchase consideration as the aggregate of the shares and other securities issued and the payment made in the form of ach or other assets by the transferee company to the shareholders of the transfer of company. Although, purchase consideration refers to total payment made by purchasing company to the shareholders of Vendor Company, its calculation could be in different methods that is lumpsum,asset payment and netpayment