Question33 On 28 March 20X4, ABC Ltd purchases 100% shares of X Ltd in exchange for $23,000,000 cash consideration and 10,000,000 ordinary voting shares of ABC Ltd. ABC Ltd’s shares were originally issued in 20X2 at a price of $4 each, but their fair value on the acquisition date is $6 per share. Additionally, the company incurs $280,000 in legal and accounting fees directly associated with the acquisition.Calculate the total cost of this business acquisition. $63,000,000 $83,280,000 $63,280,000 None of the options are correct. $83,000,000 ResetMaximum marks: 1 Flag question undefined

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Start by identifying what constitutes the 'total cost' of a business acquisition in this context. The acquisition involves cash paid, the fair value of shares issued, and any acquisition-related costs.
Option 1: $63,000,000. This would only reflect the cash consideration, omitting the value of the shares issued. Since the deal also includes 10,000,000 ABC Ltd ordinary shares, this option ignores a substantial portion of the consideration transferred and is therefore incomplete.
Option 2: $83,280,000. This figure might look like it includes cash plus shares (23,000,000 + 60,000,000 = 83,000,000) but adds an extra $280,000, which corresponds to the acquisition-related costs. Under standard accounting treatment for business combinations, acquisition-related costs are generally expensed separately and do not increase the 'cost of the acquisition' recorded in the consolidated balance sheet. Thus, adding the $280,000 to the total would inflate the recognized cost improperly.
Option 3: $63,280,000. This amount appears to combine the cash component (23,000,000) with some portion of the share value but not the full fair value of the issued shares (which would be 10,000,000 × 6 = 60,000,000). The result would understate the cost by excluding part of the consideration transferred.
Option 4: None of the options are correct. Given the standard approach described above, one of the provided options matches the appropriate accounting treatment, so this option would be incorrect if we accept standard IFRS/ASC guidance.
Option 5: $83,000,000. This combines the cash consideration (23,000,000) with the fair value of the shares issued (10,000,000 × 6 = 60,000,000) for a total of 83,000,000. The acquisition-related costs ($280,000) are typically expensed separately and do not increase the total cost recorded for the business combination. Therefore, this option aligns with the proper calculation under standard accounting rules and is the correct choice given the data. If you were to treat acquisition costs as part of the cost, the figure would differ, but that treatment is not standard practice for determining the cost of the acquisition itself.

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