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Hi Tutors,
Please kindly see the below question:
Manchester has 10 million $1 issued ordinary shares. At 1 May 20×9 Bristol purchased 70% of Manchester’s $1 ordinary shares for 8,000,000. At that date Manchester had net assets with a fair value of $8,750,000 and its share price was $1.20. The non-controlling interest is valued using the share price at the date of acquisition.
What was the total goodwill arising on acquisition at 1 May 20×9?
im having issues with calculating the nci share for this question as i calculated it as $2,400,000 (1.20 x 2,000,000 because there was 10 million shares and Bristol purchased 8 million shares which leaves 2,000,000. But the answers shows that nci share at the date of acquisition was 3,000,000 shares – how is it 3,000,00?
They didn’t buy 8 million shares. The question says that they bought 70% of Manchesters shares, and 70% of 10 million is 7 million.
( $8 million is the amount that they paid for the 7 million shares.)
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