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Step 2. Calculate Cost of Acquisition. The Cost of Acquisition consists of 2 components. Do you remember what they are?. Click on the mouse to check your answers below. Purchase Consideration Other Associated Costs. Step 2. Calculate Cost of Acquisition.
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Step 2 Calculate Cost of Acquisition The Cost of Acquisition consists of 2 components. Do you remember what they are? Click on the mouse to check your answers below. • Purchase Consideration • Other Associated Costs
Step 2 Calculate Cost of Acquisition Costs directly attributable to the Acquisition Purchase Consideration + This is what the acquirer gives up • Accounting Fees • Consultancy Fees • Legal Fees • Valuations • Assets exchanged • Liabilities assumed • Shares issued
Step 2 Calculate Cost of Acquisition Shareholders of Pizza Ltd receive 1 share for every 2 shares held. There are 50,000 shares altogether and each share has a value of $2 Since $20,000 will be paid after 1 year, its fair value is equal to the present value, The discount rate (11%) is based on Burger Limiteds interest rate (see Loan in the Balance Sheet)
Step 2 Calculate Cost of Acquisition Did you read the comment by the Board Chairman? He said that legal fees amounted to $1,500 Now we can calculate the cost of acquisition. • Purchase Consideration = $68,018 • Other Associated Costs = $ 1,500 • Cost of Acquisition = $69,518 End Step 2
