Petroni Ltd Acquired All the Issued Share Capital of Wallace

question 12

Multiple Choice

Petroni Ltd acquired all the issued share capital of Wallace Ltd on 1 April 20X1.Wallace Ltd's shareholders equity (all at fair value) at that date was as follows:
$\begin{array}{llcc} &\text { 000s} & \\ \text { Paid up capital } &\$3000\\ \text {General reserve } &\$1000\\ \text { Retained profits } &\$500\\\end{array}$



What was the cost of acquisition (that is, the control date fair value of the consideration provided) to Petroni Ltd, if consolidation goodwill resulting from the business combination (purchased goodwill) of $500 000 was recognised in the consolidated financial statements prepared on 1 April 20X1?

• A)$500 000
• B)$5 000 000
• C)$4 000 000
• D)$4 500 000

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Definitions:

Annual Interest Rate

The percentage of interest that is charged or earned on an investment or loan over the course of a year.

Revolving Line

A credit arrangement that allows a borrower to use or withdraw funds up to a designated limit, repay them, and borrow again.

Simple Interest

A method of calculating interest where the interest charge is based only on the original principal, not on the interest which has been added over time.

Annual Rate

The interest rate for a period of one year.