Fruitcorp Ltd Has Been Negotiating a Merger with a Company

question 12

Multiple Choice

Fruitcorp Ltd has been negotiating a merger with a company that is currently its major supplier.Subsequent to reporting date the merger agreement is finalised.The merger materially affects the size and structure of the new entity and should bring substantial economic benefits to all shareholders.How should this event be reported according to AASB 110?

• A) The size and significance of this event is such that it should be fully reflected in the financial accounts. New group accounts should be prepared to reflect the actual economic entity that exists at the time of completion of the financial reports.
• B) No disclosure is appropriate.
• C) A description of the event, the fact that it occurred after reporting date and its financial effect on the company should be disclosed by way of a note to the accounts.
• D) Disclosure of the event in the Directors' Declaration is required by AASB 110.
• E) None of the given answers.

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Definitions:

Product Cost

An accounting measure that includes all costs required to bring a product to market, specifically focusing on direct materials, direct labor, and overhead costs.

Assembler's Wages

Compensation paid to workers specifically engaged in assembling products during the manufacturing process.

Direct Labor

The cost of wages for workers who are directly involved in the production of goods or services.

Product Cost

The expenses directly related to manufacturing the products a company sells, such as materials, labor, and overhead costs.