Ayayai Corp. is facing a decision as to whether to purchase 40% of Kyla Corp.’s shares for $1.20 million cash, giving Ayayai significant influence over the investee company, or 60% of Kyla’s shares for $1.80 million cash, making Kyla a subsidiary company. The book value of Kyla’s net assets is $3.00 million (assets are $10 million and liabilities are $7.00 million).
How will this investment affect Ayayai’s statement of financial position if Ayayai acquires a 60% interest, assuming Ayayai applies IFRS? Indicate the immediate effect on Ayayai’s total assets, total liabilities, and shareholders’ equity. (Enter answers in millions to 2 decimal places, e.g. 1.25. Do not leave any answer field blank. Enter 0 for amounts.)
Homework Answers
If Ayayai acquires 60% of Kyla Corp.’s shares for $1.8 million cash, and now controls Kyla’s operations (Kyla is a subsidiary company), Beckett’s consolidated statement of financial position will be affected as follows:
A L SE
+10.0M Due to Kyla’s
assets
+7.0M Due to Kyla’s
liabilities
+1.2M 40% non-
controlling
interest in
Kyla’s net
assets
- 1.8M Cash _____ _____
+ 8.2M +7.0M +1.2M
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Ayayai Corp. is facing a decision as to whether to purchase 40%
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