(a) Hapsburg, a public listed company, acquired the following investments: • On 1 April 2003, 24…

(a) Hapsburg, a public listed company, acquired the following investments: • On 1 April 2003, 24 million shares in Sundial. This was by way of an immediate share exchange of two shares in Hapsburg for every three shares in Sundial plus a cash payment of $1 per Sundial share payable on 1 April 2006. The market price of Hapsburg s shares on 1 April 2003 was $2 each. • On 1 October 2003, 6 million shares in Aspen paying an immediate $2.50 in cash for each share. Based on Hapsburg s cost of capital (taken as 10% per annum), $1 receivable in three years time can be taken to have a present value of $0.75. Hapsburg has not yet recorded the acquisition of Sundial but it has recorded the investment in Aspen. The summarized statement of financial positions at 31 March 2004 is: The following information is relevant: (i) Below is a summary of the results of a fair value exercise Sundial carried out; date of acquisition: The book values of the net assets of Aspen at the date of acquisition were considered to be a reasonable approximation to their fair values. (ii) The profits of Sundial and Aspen for the year to 31 March 20X4, as reported in their entity financial statements, were $4.5 million and $6 million respectively. No dividends have been paid by any of the companies during the year. All profits are deemed to accrue evenly throughout the year. (iii) In January 20X4 Aspen sold goods to Hapsburg at a selling price of $4 million. These goods had cost Aspen $2.4 mil

 

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