Kaplan Fixed Test 2 – Goodwill

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    rositca
    Participant
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    Hi,

    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


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    MikeLittle
    Keymaster
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    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?


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


    Profile photo of MikeLittle
    MikeLittle
    Keymaster
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    welcome

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