Homework Answers
A) Determination of Fair Value of shares of Vega - On the date of Acquisition.
Total no. of shares of Vega Ltd. 15,000/15% = 100,000.
Total Net Assets = 6,450,000 (Book Value of Net Assets as given in question)
Fair Value for the year 1 = Book value of Net Assets (Hence book value of assets remained unchanged irrespective of change in year)
Fair Value Per share = 6,450,000/100,000 = 64.50
Fair Value of 15,000 shares = 64.50 * 15,000 = 967,500
B) Computation of revaluation gain or loss in respect of 15,000 shares purchase in Year 1 ( question restrict to consider shares purchase in year 2)
Fair Value of Assets = 6,850,000
Total No of shares = 100,000 (remained unchanged)
Fair value per share = 6,850,000/100,000 = 68.50
Fair Value of 15,000 shares = 68.50 * 15,000 = 1,027,500
Alternative 1 (if we recorded value of share at the time of purchase on the Purchase Price (15000*60 = 900,000))
Gain due to revaluation is = 1,027,500 - 900,000 = 127,500
Alternative 2 (if we recorded value of share at the time of purchase on the Fair Value)
Gain due to revaluation is = 1,027,500 - 967,500 = 60,000
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