WORKSHEET ENTRIES AT ACQUISITION DATE -.AV* At 1 July 2014, Pavo Ltd acquired 60% of the shares of Octans Ltd for 5153000 on a cum div. basis. Pavo Ltd had acquired 40% of the shares of Octans Ltd two years earlier for $80000. This investment, classified as a financial asset, was recorded at a fair value on 1 July 2014 of $102 000. The changes in fair value had all been taken to other comprehensive income. At 1 luly 2014, the equity of Octans Ltd consisted of:
Share capital $160000 Retained earnings 40000
At this date, the identifiable assets and liabilities of Ottans Ltd were recorded at fair value except for:
Carrying amount Inventory $ 40 000 Plant (cost $1200001 100000
Fair value $ 44 000 10$ 000
At 1 July 2014. Octans Ltd’s assets and liabilities included a dividend payable of $5000, and goodwill of $6000 (net of $4000 accumulated impairment losses). An analysis of the unrecorded intangibles of Octans Ltd revealed that the company had unrecorded internally generated brands, considered to have a fair value of 550000. Further, Octans Ltd had expensed research outlays of $80 000 that were considered to have a fair value of 520000. in its financial statements at 30 June 2014, Octans Ltd had reported a con-tingent liability relating to a potential claim by customers for unsatisfactot• products, the fair value of the claim being $10 000. The tax rate is 30%. Required Prepare the acquisition analysis at 1 July 2014, and the consolidation worksheet entries for preparation of consolidated financial statements of Pavo Ltd at that date.
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In this case study, you are required to apply the concepts of risk and returns. This case study requires you to understand the risk and reward trade-off of an ASX-listed company during the recent COVID pandemic. Based on the first letter of your first name, choose the corresponding ASX-listed company from the word file below.
Company List.docx
After choosing the company that corresponds to your name, go to Yahoo Finance website below and type the ASX ticker code of your company.
https- lilance.yahoo.com/
In the historical data tab, download the daily stock prices of your company from 1#,,Irol■zo_ryt.,3L#,Win,. Using the adjusted close (Adj. close)column which is the daily closing price, compute the daily stock returns in the above sample period. Repeat the steps in the italic paragraph above but now using ASX200 in the following link https- Iflance.yahoo.com/qp=%5EAXIO Using the daily returns for your company and ASX200 (i.e. market) and assuming a daily risk-free rate of 0%, perform thefollowing: 1) Calculate and compare the mean daily returns and standard deviation of your chosen firm and ASX200. Looking at the risk and reward trade-off, do you think that your stock is more or less risky than than ASX200 during the sample period? (10 marks)
2) Assuming a risk-free rate of 0% during the period, calculate the beta of your chosen company using daily returns of your company and ASX200. Interpret the beta coefficient. Then, compare the company beta you calculated with the company beta on Yahoo Finance available in the Summary Tab (This is just an example using ANZ. You need to look up Yahoo Finance beta of your selected company). What do you think happen to the company’s beta (i.e. systematic risk) during the COVID period? (10 marks)
Submit your workings and answers in a word or PDF document. Your document must clearly demonstrate how the figures and numbers are calculated. In your document, you must at least include: (a) The daily prices (adj. close) and daily returns of your stock and ASX200: (b) Brief explanation of how the mean daily return, standard deviation and beta are calculated. (c) Findings and the interpretations for the findings.
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