Kaplan Fixed Test 2 – Goodwill

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    I`ve just finished with Kaplan Fixed Test 2 /2011 edition/ , checked online my results via Kaplan en-gage and I can`t understand the goodwill calculation. The answer is 215, I have 465.

    My goodwill calculation is:

    Net assets:
    – Share capital 150
    – Ret.earn./700*6/12/ pre acq.period 350
    – Fair value land 125

    Investment: 900
    NCI 230
    Less net assets -625
    Less Imp. -40
    Goodwill 465

    My mistake – Ret.Earnings – 600 /700-100/, but I can`t understand why this is the correct answer.

    Can someone explain my why???

    Thank you

    Profile photo of MikeLittle

    Yes! The figure of 700 in the SoFP is retained earnings since Salter was created. What we need is retained earnings 6 months ago.

    So, how much were the retained earnings brought forward from last yea? that would be 700 now, less 200 retained profits for the last 12 months – ie, profit for the year in the SoIncome.

    Right, that’s 500 ret ears as at 1 April a year ago. Now add the profits for 6 months up to date of acquisition – that would be this year’s 200 x 6/12 ie 100.

    So 500 brought forward + 100 for the first 6 months of this year = 600 retained earnings as at date of acquisition.

    600 + share capital of 150 + fair value adjustment of 125 gives fair value of net assets of 875.

    Compare that with cost of acquisition 900 + nci valuation of 230 ie 1,130

    and that gives a goodwill figure of 255

    This is, according to the question note 5, impaired by 40.

    So goodwill in the SoFP is 215

    Is that ok?


    Everything is clear now.
    Thank you so much Mike!!!!!

    Profile photo of MikeLittle


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