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Peterlee’s Goodwill ………….4 million
Trantor’s Goodwill …………..2,5 million
Solution:
my view, the acquisition is a a share exchange therefore:
– goodwill of 2,5 for Trantor is acceptable
– not for Peterlee because it indicates to include trantor’s goodwill within this method.
my question:
is it right what I am thinking abou`t? otherwise I did not understood the exercise. Could someone help me please?
ThanksIs this an F7 question – it sounds more like P2. Are these 2 subsidiaries or is it a vertical group?
Sorry, but I don’t have the Kaplan kit in front of me 🙁
Thanks for your reply, there we go. The exercise is:
F7 Practice Queston book Kaplan;
Peterlee is preparing its FS for 31.03.06 as following;
i) Peterlee aquired the entire share capital of Trantor during the year. Acquisition achieved through exchange share. This exchange were based on the realtive values of the two companies obtained by capitalizing the companies’ estimated future cash flows. When the fair value of Trantor’s identifiable net assets was deducted from the value of the company as a whole, its goodwill was calculated at $2,5 million. A similar exercise valued the goodwill of Peterlee at $4 million. The directors wish to incorporate both the goodwill values in the companies’ consolidaded statements.
Question: describe and quatify where possible how Peterlee should treat this transaction.
Solution:
May you help me?Hi Mike!! I did complete the information, that you can understand the background of my question. May you help me with that? Thanks for your prior replies!
Hi
No, it still doesn’t make sense to me! Why is Peterlee ( I presume that this is the parent company ) valuing its own goodwill and trying to recognise it as an asset? I really do not understand! Sorry 🙁
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