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i) H acquired 3m equity share of M when M had a total of 4m share in issue. H paid a total of $25m to acquire share.
II) the retained earnings of M were $20m and carrying amount of the net assets of M approximated to their fair value.
III) It is the group acccounting policy to account for NCI at its fair value. As at date of acquisition, the fair value of NCI in M was $7m.
Calculate good will arising on acquisition of M by HThe net assets at the date of acquisition are equal to the share capital + reserves, so in this case a total of $24M (assuming that the nominal value of the shares is $1 each, but the questions must tell you the nominal/par value).
The consideration paid plus the fair value of the NCI is $32M.
Therefore the goodwill is $8M.
I do suggest that you watch my free lectures on this. The lectures are a complete free course for Paper FA and cover everything needed to be able to pass the exam well.
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