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)$3 500
B)$10 500
C)$15 000
D)$65 000

Question

Quizplus · Accepted Answer

The business combination valuation reserve is calculated as the difference between the fair value and the carrying value of the plant, multiplied by the tax rate: ($65,000 - $50,000) * 30% = $15,000 * 30% = $4,500. However, the reserve is the difference before tax, which is $15,000.

Company X Acquired Company Y When the Carrying Value of Company