On 01 July 2022, Persian Ltd acquired 551,250 ordinary shares of Sumo Ltd, that is, Persian Ltd holds 70% shares in Sumo Ltd. The purchase consideration was as follows:

• Cash paid $ 950,000
• A deferred cash settlement to be paid in three years’ time of $ 475,000
• By an exchange of one share in Persian Ltd for every four shares in Sumo Ltd. The market price of Persian Ltd share at the date of acquisition was $ 2.95 and the market price of each Sumo Ltd share at the date of acquisition was $ 3.15

Legal fees associated with the acquisition were $ 10,500.

The discount rate of Persian Ltd is 10 %.

(a) Calculate the fair value consideration (Costs of investment) transferred to acquire control of Sumo Ltd at the date of acquisition. Your answer should include a brief explanation if any of the above issue(s) is/are not required to be accounted in your working(s).                    

P acquired 75% of the shares in S on 1 January 20X7 when S hadretained earnings of £15,000. The market price of S’s shares at thedate of acquisition was £1.60. P values non-controlling interest atfair value at the date of acquisition. Goodwill is notimpaired.

P S

Property, plant and equipment 80,000 60,000

Shares in S 68,000

Total Non Current Assets 148,000 60,000

Current Assets 52,000 35,000

Total Assets 200,000 95,000

Share capital - £1 shares 100,000 50,000

Retained earnings 70,000 25,000

Total Equity 170,000 75,000

Current liabilities 30,000 20,000

Total Equity and liabilities 200,000 95,000

1. Prepare the consolidated balance sheet of P Group

2. Explain and comment the process of consolidation?

1. Merits and shortcomings of the consolidation accounting requirements that recognise the goodwill on acquisition & eliminate the investment in the subsidiary, and the fair value of the issued capital and reserves of the subsidiary at the date of acquisition.

2. Impact of these requirements on the information needs of two key user groups: existing shareholders of the ultimate parent, and a non-controlling interest shareholder of a subsidiary.

Corresponds to CLO 3(b) On January 1, 2014, Q Company purchasedall of the common stock of X Company by issuing 30,000 shares ofits $10 par value common stock, with a market value of $16/share. QCompany incurred $25,000 in registration and issuing costs, paid incash. The book value of X Company at the date of acquisition was$480,000. Q's journal entry to record this acquisition includes:(Points : 8.33)

A debit to cash for $25,000.

A credit to additional paid-in capital for $180,000.

A debit to Investment in X for $300,000.

A credit to additional paid-in capital for $155,000.

None of the above.

(Please explain why...I would really like to learn!) : )