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- This topic has 1 reply, 2 voices, and was last updated 1 year ago by Kim Smith.
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- March 26, 2023 at 4:17 pm #681845
On January 1 2022, the company bought 1,600,000 of the ordinary share capital of Negril Limited at a price of $7,600,000 and 30% of the ordinary shares of Cove Limited for $400,000. The total share capital of Negril Limited was 2,000,000 $1 ordinary shares. At the date of the acquisition the retained earnings of Negril Limited was $76,000 and the general reserve balance was $123,000. Cove Limited is a small distribution company in Hanover with a share capital of 600,000 $1 ordinary shares.
The purchase consideration for Negril Limited was satisfied by the issue of 3 ordinary shares in Hanover Agencies Limited for every 4 shares acquired in Negril Limited. At this date the market price of a share in HAL was $3.20. The balance on the purchase consideration represents an issue of $2,000,000 in 10% loans stocks by HAL to the shareholders of Negril Limited and a deferred cash payment, to be satisfied in 5 years’ time (appropriate discount rate 9%).
Calculate the goodwill acquired by HAL on the acquisition of Negril limited.How would i approach the above question?
March 26, 2023 at 5:43 pm #681849I suggest you start with Chapter 23 of the notes and corresponding lecture that you can access here https://opentuition.com/acca/fr
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