ACCA FA · Chapter 13 · Question 10 of 12
P acquired 400,000 of S's 500,000 ordinary shares, issuing 2 new P shares for every 5 S shares acquired. On the acquisition date, the market value of a P share was $3.50. What is the fair value of the consideration?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $560,000
Explanation
Number of P shares issued = 400,000 x 2/5 = 160,000. Consideration at fair value = 160,000 x $3.50 = $560,000. Basing the calculation on all 500,000 S shares gives $700,000, and $160,000 is the number of shares issued rather than their value.
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