ACCA FA · Chapter 13 · Question 2 of 12
P acquired 80% of the ordinary shares of S for $640,000 cash. At the acquisition date, S had share capital of $300,000 and retained earnings of $380,000. The fair value of S's land was $50,000 higher than its carrying amount. Non-controlling interest is measured at its fair value of $150,000. What is the goodwill arising on acquisition?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) $60,000
Explanation
Fair value of net assets acquired = $300,000 + $380,000 + $50,000 = $730,000. Goodwill = consideration $640,000 + NCI $150,000 - net assets $730,000 = $60,000. Omitting the fair value adjustment gives $110,000. Measuring NCI at its proportionate share (20% x $730,000 = $146,000) would give $56,000, but the question specifies fair value.
More Simple consolidated financial statements MCQs
- Q4P acquired 80% of S when S's retained earnings were $380,000. At the year end, P's retained earnings are $820,000 and S's are $470,000…
- Q5During the year, P sold goods to its subsidiary S for $120,000. P's revenue was $900,000 and S's revenue was $400,000 (both including…
- Q6P sold goods to its subsidiary S for $60,000, at a mark-up of 25% on cost. At the year end, S still held 40% of these goods in inventory…
- Q7At the year end, P's receivables are $85,000 and S's are $46,000. P's receivables include $7,000 due from S. S's payables show $5,000 owed…
- Q8An investor holds 35% of the voting shares of an entity and has significant influence, but not control, over it. How should the investment…