Company X acquired Company Y when the carrying value of Company Y's plant was $50 000. The fair value of the plant on acquisition date was $65 000. The company tax rate was 30%. How much is the amount of the business combination valuation reserve that must be recognised?
A) $65 000
B) $15 000
C) $10 500
D) $3 500.

Question

Quizplus · Accepted Answer

The business combination valuation reserve is the difference between the fair value and the carrying value of the plant, adjusted for tax. The difference is $15,000 ($65,000 - $50,000). After accounting for tax (30% of $15,000), the reserve is $10,500.

Company X Acquired Company Y When the Carrying Value of Company